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EXHIBIT 10.3
SINO-FOREIGN COOPERATION CONTRACT ("CONTRACT")
SHENZHEN HUAXUAN PRINTING PRODUCT CO. LTD.
1. GENERAL PRINCIPLES
Gushu Economic Development Company, Xixiang Town, Baoan District,
Shenzhen City, People's Republic of China and Hong Kong Xxx Xxxx
Printing Holdings Limited, according to the PRC Sino-Foreign Joint
Venture Enterprise Law and other relevant laws and regulations of the
PRC and relevant rules and regulations of the Shenzhen Special Zone,
based on the principles of equality and friendly negotiations, agree to
enter into this Contract for conducting a sino-foreign cooperation
enterprise in Shenzhen Economic Special Zone, the People's Republic of
China, Guangdong Province.
2. THE PARTIES
(1) Parties to this Contract :
Gushu Economic Development Company, Xixiang Town, Baoan
District, People's Republic of China ("Party A") is registered
in Shenzhen China having its registered address at Gushu Xixiang
Town, Shenzhen City.
Legal Representative : Jiang Xxxx Xxxx
Position : General Manager
Nationality : Chinese
(Hong Kong) Xxx Xxxx Printing Holdings Company Limited ("Party
B"), is registered in Hong Kong and has its registered address
at 00xx Xxxxx, Xxxxx X, Xxxx Xxx Xxxxxxxxxx Xxxxxxxx, 603-609
Castle Peak Road, Tsuen Wan, New Territories, Hong Kong.
Legal Representative : Wu Xxx Xxx
Position : Director
Nationality : Australian
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3. INCORPORATION OF COOPERATION COMPANY
(2) Both Parties A & B agree to establish a sino-foreign cooperation
enterprise (the "Cooperation Company") under the following name:
Shenzhen Huaxuan Printing Product Company Limited
Registered address of the Cooperation Company : Gushu Economic
Development Company, Xixiang Town, Baoan District, Shenzhen
City.
(3) The incorporation of the Cooperation Company shall be approved
by the Chinese government and shall have enterprise legal person
status. All of its activities must comply with the laws and
regulations of the PRC, and the lawful rights and
responsibilities of the Cooperation Company shall be protected
by Chinese law.
(4) The Cooperation Company shall be a limited liability company.
The parties to the Contract agree to the conditions of
cooperation, the distribution of profits, the sharing of risks
and losses, the manner of management and administration and the
distribution of assets upon termination of cooperation.
4. SCOPE OF BUSINESS AND SCALE
(5) Scope of business of the Cooperation Company : production of
printing products and die cast plastic toys.
(6) Scale of production of the Cooperation Company : Products with
an annual value of twenty million.
5. TOTAL INVESTMENT, REGISTERED CAPITAL AND CONDITIONS OF COOPERATION
(7) Total investment of the Cooperation Company : RMB20,000,000;
Registered capital : RMB20,000,000;
(8) The parties shall provide the following conditions for
cooperation:
Party A : provision of factories, dormitories and warehouses as
stated in Schedule 1, Total area is 23,031.94m2 (the
"Property").
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Party B : injection of RMB20,000,000 as registered capital in
the following format as its contribution of capital :
Cash : RMB4,000,000
Machinery: RMB16,000,000 (value to be authenticated by an
examination conducted by the China Commercial Examination
Department).
Party B shall inject its capital contribution in foreign
exchange according to the mean rate of Renminbi and foreign
exchange rates issued by the Bank of China on the day of payment
of contribution.
(9) Contribution capital and cooperation conditions of the
Cooperation Company shall be paid or supplied in instalments.
First stage : Party A injects the Property, Party B injects 50%
of the cash and facilities within 3 months after the issue of
the business licence of the Cooperation Company.
Second stage : Party B : 50% of cash and facilities within one
year after the issue of the business licence of the Cooperation
Company.
Within 30 days of the injection of capital and the fulfilment of
the conditions of Cooperation Company by both parties, the facts
must be verified and certified by accountants registered in
China and a verification report shall be issued. A certificate
of the contribution of capital shall be issued by the
Cooperation Company in accordance thereto (or upon production of
evidence of the provision of the conditions of Cooperation
Company).
(10) If either party of the Cooperation Company needs to transfer any
or all of its rights or obligations, such transfer becomes
effective upon the capital or conditions of cooperation having
been totally contributed or provided and a resolution of the
Board of Directors, and within one month after approval by the
original approval authority and the procedures of the amendment
has been dealt with by the Administration of Industry and
Commerce. Other than to the other cooperation party, a party of
the Cooperation Company may not pledge the whole or a part of
its rights or responsibilities to a third party.
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Unless agreed in writing by the other party, a party may only
transfer its whole or a part of its rights or responsibilities
of the Cooperation Company to the other party of the Cooperation
Company.
Transfers will be ineffective if in breach of the above
stipulations.
6. COOPERATION PARTIES AND THEIR RESPONSIBILITIES
(11) Parties of the Cooperation Company shall comply with the
following matters:
Responsibilities of Party A :
Responsible for dealing with the land use rights and property
certificates, and responsible for dealing with the relevant
procedures legally and responsible for paying all expenses;
Handle all matters of application for the establishment and
registration of the Cooperation Company;
Handling the procedures of the Property and building facilities;
Organise the design and construction of the Property and other
construction and facilities;
Supply the terms of cooperation according to the provisions of
Clause 8;
Assist in the Customs import procedures for the machinery
equipment and raw materials for the establishment of the
Cooperation Company;
Assist in the purchase or lease of facilities, raw materials,
office equipment, transportation and communication facilities of
the Cooperation Company in China;
Responsible for the expenses and taxation of the structural
amendments, management fees, property tax, land use tax, etc. of
the Property;
Assist in the implementing of the conditions of production such
as the water supply, electricity supply, transportation etc.;
Assist in the recruitment of managers, technicians, workers and
other staff of the Cooperation Company;
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Assist in dealing with the relevant entry and work procedures of
foreign staff working in the Special (Economic) Zone;
Responsible in dealing with other matters as entrusted by the
Cooperation Company.
Responsibilities of Party B :
Supply the terms of cooperation according to the provisions of
Clause 8;
Assist in dealing with the relevant matters of purchasing
machinery and equipment, raw materials etc., on the
international market for the Cooperation Company;
Assist in the recruitment of technicians and inspectors for the
instalment of facilities, testing and production of the
Cooperation Company;
Assist the Cooperation Company in the training of technicians
and workers;
Responsible for stabilising the production of quality products
by the Cooperation Company within the stipulated period
according to design capability;
Responsible for dealing with other matters as entrusted by the
Cooperation Company.
7. TECHNOLOGY, FACILITIES, RAW MATERIALS
(12) Facilities needed in the Cooperation Company can be purchased on
the domestic and international markets; the price of such
facilities cannot be higher than the price level of comparable
items within the same period of time.
(13) The facilities purchased in the international market by the
Cooperation Company shall be submitted to the China Commercial
Products Examination Department for examination and
certification in accordance with the stipulations of the LAW OF
EXAMINATION OF IMPORTED AND EXPORTED PRODUCTS OF THE PEOPLE'S
REPUBLIC OF CHINA.
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(14) The original raw materials can be purchased in or outside China
by the Cooperation Company, the price of which has to be
approved by the Board of Directors.
8. PRODUCT SALES
(15) The ratio of sales of the products of the Cooperation Company is
as follows :-
Exports : 85%.
Domestic Sales : 15%.
(16) Exports of the Cooperation Company shall be the responsibility
of Party B, domestic sales shall be the responsibility of Party
A.
(17) Sales prices of products of the Cooperation Company shall be
fixed by the Board of Directors according to the price levels
both in and outside China, and shall be adjusted at appropriate
times.
9. DISTRIBUTION OF PROFITS AND SHARING OF RISKS AND LOSS
(18) Distribution of profits shall be as follows after the
Cooperation Company has paid taxes and reserved money for the
different funds:
In the first year, the Cooperation Company shall pay Party A a
fixed sum of RMB2.76 million from the date of issuance of the
business licence of the Cooperation Company which shall be paid
in monthly instalments every month in advance. Party B
guarantees the Cooperation Company will pay Party A on time.
From the second year onwards, the payment shall be increased by
5% every year. If the Cooperation Company suffers losses or the
profits for distribution are not sufficient, then Party B shall
be responsible to pay the full amount. The balance of the
profits shall belong to Party B after the guaranteed payment of
distributable profits to Party A by Party B.
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(19) Profits distributed to the foreign party of the Cooperation
Company after implementing the responsibilities stipulated by
law and under this Contract and capital distributed at the
termination of the Cooperation Company can be repatriated from
China in accordance with the law.
The salaries and other lawful income of the foreign staff of the
Cooperation Company can be repatriated from China after paying
individual income taxes according to the law.
(20) Business losses of the Cooperation Company shall be the sole
responsibility of Party B.
10. BOARD OF DIRECTORS AND THE ORGANISATION OF THE MANAGEMENT OF BUSINESS.
(21) The Cooperation Company shall have a Board of Directors. The
date of issuance of the business licence of the Cooperation
Company shall be the formal establishment date of the Board of
Directors.
(22) The Board of Directors shall consist of five directors, Party A
shall appoint one director and Party B shall appoint four
directors. The Chairman of the Board of Directors shall be
appointed by Party B; the vice-chairman shall be appointed by
Party A. The term of office of the directors and chairman is
four years. Appointments can be extended by further appointment
of the original appointing Party.
(23) The Board of Directors is the highest authority of the
Cooperation Company. It decides on all major issues of the
Cooperation Company. The major issues stated in Schedule 2 may
only be finalised after they have been approved unanimously by
the Board of Directors. For other matters, they shall be
effective only if they are approved by more than half of the
directors.
(24) The Chairman is the legal representative of the Cooperation
Company. If the Chairman cannot perform his responsibilities
with cause, he can authorise the vice-chairman or other
directors to act as his representative.
(25) Meetings of the Board of Directors shall be held at least once a
year, meetings shall be called and chaired by the Chairman. The
Chairman can call extraordinary meetings after they are proposed
by at least a third of the directors. Minutes of the meeting
shall be signed by the attending directors as confirmation and
kept on file.
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(26) The quorum of the meetings of the Board of Directors shall be
two-thirds of the directors. If a director cannot attend a
meeting with cause, he can appoint a person by a power of
attorney to represent him to vote. If a director cannot attend a
meeting of the Board of Directors, and does not appoint a proxy,
he shall be deemed to have waived his voting rights.
(27) Meetings of Board of Directors shall normally be held at the
registered address of the Cooperation Company.
(28) Economic liabilities and the corresponding legal consequences
caused by graft or dereliction of duty of a director resulting
economic losses of the Cooperation Company shall be borne by
that director.
(29) The Cooperation Company shall establish a business management
department at its registered address to be responsible for the
company's daily work. The business management department shall
have one general manager and two deputy managers. They shall be
recruited and appointed by the Board of Directors. The members
of the Board of Directors may also be the general manager or the
deputy general managers.
The general manager shall be responsible to the Board of
Directors.
(30) The general manager and deputy managers must be full-time staff
of the Cooperation Company at its registered address, and they
may not be the general manager or deputy managers of other
economic organisations. They may not join other economic
organisations which are competitors of the Cooperation Company.
(31) The deputy manager shall assist the general manager. The general
manager shall discuss important matters with the deputy general
managers. When they cannot agree with each other, a decision
shall be taken by the Chairman of the Board of Directors.
(32) If any general manager, deputy manager and other senior
management staff commits graft or is in serious dereliction of
his duty, his employment contract may be terminated by
resolution of the Board of Directors. If there are economic
losses to the Cooperation Company, such person shall be
responsible for the economic losses and the corresponding legal
responsibilities. If any general manager, deputy manager and
other senior staff resigns with cause, written resignations
shall be submitted 60 days in advance to the Board of Directors.
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(33) The recruitment, termination, remuneration, benefits, living
expenses, labour protection, labour insurance, rewards and
punishments shall be formulated by the Board of Directors of the
Cooperation Company in accordance with the relevant laws and
regulations of Shenzhen Economic Zone, PRC.
(34) Recruitment and salaries, social insurance, welfare, expenses of
business trips of senior management staff of the Cooperation
Company shall be matters discussed and decided by the Board of
Directors.
11. TAXATION, AUDIT, FINANCIAL BUSINESS, STATISTICS AND ENVIRONMENTAL ISSUES
(35) The Cooperation Company shall pay all taxation according to the
relevant PRC laws.
(36) The staff and the workers of the Cooperation Company shall pay
individual income tax in accordance with the relevant PRC tax
laws and regulations.
(37) According to relevant PRC laws the Cooperation Company shall set
aside reserve funds, development funds of the Cooperation
Company, welfare funds of the staff and workers and incentive
funds. The proportion of the three funds shall be decided and
discussed by the Board of Directors according to the business
situation of the Cooperation Company.
(38) The Cooperation Company shall establish an accounting department
at its registered address, comprising accounting staff,
preparing accounting books, and formulating the accounting
system of the Cooperation Company.
The accounting system of the Cooperation Company shall be
reported to the financial, taxation departments, and the
Cooperation Company shall accept the supervision of the
financial, taxation, audit departments; either party has the
right to employ accountants at its own expense to examine the
accounting books of the Cooperation Company.
(39) The Cooperation Company shall open a foreign exchange account at
a national bank foreign exchange institution which engages in
the business of foreign exchange. Foreign exchange matters of
the
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Cooperation Company shall be dealt with in accordance with the
relevant State foreign exchange management regulations.
(40) The Cooperation Company can obtain loans from financial
institutions in or outside China. The responsibilities for Loans
and the guarantees for such Loans which are used as conditions
for cooperation by a cooperation party shall be borne by that
party.
(41) According to the relevant State regulations, the Cooperation
Company shall submit monthly, seasonal, annual accounting
reports and statistics reports to the relevant departments.
(42) According to ENVIRONMENTAL PROTECTION LAW OF THE PEOPLE'S
REPUBLIC OF CHINA. The Cooperation Company shall undertake the
rights and obligations to protect the environment and implement
measures to prevent pollution.
12. INSURANCE
(43) The Cooperation Company shall purchase all its insurance from
the insurance companies within China. The types of the
insurance, the value of the insurance and their duration, etc.,
shall be decided by the Board of Directors of the Cooperation
Company in accordance with the relevant State laws.
13. CHANGE AND TERMINATION OF CONTRACT
(44) During the term of cooperation, the parties shall negotiate and
sign written agreements regarding major amendments to the
Contract which shall be submitted to the original approving
authorities for approval, and which shall be produced to the
China Commercial Products Examination Department for examination
and certification and shall become effective upon registration
with the Administration for Industry and Commerce.
(45) If the Contract of the Cooperation Company cannot be performed
because of a force majeure or continuing losses or insufficiency
of business of the Cooperation Company, after it has been
resolved unanimously by the Board of Directors and has been
submitted to the original approving authorities for approval,
the Contract of the Cooperation Company may be terminated and
the Cooperation Company shall be cancelled by the Administration
for Industry and Commerce.
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(46) Where either party of the Cooperation Company becomes bankrupt
or is liquidated, the Cooperation Company shall seek the
approval of the original approving authorities to terminate the
Cooperation Contract prior to its expiry date after an unanimous
resolution of the company Board of Directors.
(47) In the event of earthquake, typhoon, flood, fire, war and other
unforeseen circumstances or other force majeure event which
cannot be foreseen and which occurrence and effects cannot be
prevented or avoided and its occurrence and the consequences
directly affect the performance of this Contract or the terms
hereof cannot be performed on time, the party who encounters the
above force majeure event shall immediately notify the other
party by cable and shall within 15 days produce full details of
the force majeure due to which the Contract of the Cooperation
Company cannot be performed or valid documents certifying the
necessary delay in performance. These documents shall be issued
by the notary public office in the district in which such event
occurred. Depending on the extent to which this Contract is
affected by such event, both parties shall negotiate and decide
whether to terminate the Contract, or to exempt part of the
responsibilities under the Contract or extend the time of
performance thereof.
(48) Where any one party does not perform its responsibilities as
stipulated under the Contract of the Cooperation Company, or
seriously breaches the provisions of the Contract of the
Cooperation Company resulting in the inability of the
Cooperation Company to conduct business or it is not possible
for the Cooperation Company to achieve its stipulated business
aims, such party shall be deemed in breach of the Contract. The
affected party shall have the right to ask for compensation from
the breaching party, and shall have the right to report to the
approval authorities for approval for the early termination of
this Contract.
14. RESPONSIBILITIES FOR BREACH OF CONTRACT
(49) Where any one party does not perform the responsibility of
paying on time its investment contributions fully or supplying
the terms of cooperation, according to Part 5 of this Contract,
the party in breach shall pay an amount equivalent to 0.5% of
its share of the registered capital to the other party for each
month delayed from the date of any such default. If it is still
not performed after six months, apart from a penalty of 3% to be
paid on the accumulated capital contribution, the
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other party has the right to submit a report for termination of
the Contract of the Cooperation Company according to Clause 48
of this Contract, and shall have the right to request the
breaching party to compensate its economic losses.
(50) In the event of default of one party with the result that this
Contract cannot be performed or cannot be performed in full,
such breach shall be the responsibility of the defaulting party.
If it is a default by both parties, the parties shall be
responsible for the breach severally according to the actual
situation.
15. TRADE UNION
(51) Workers of the Cooperation Company shall establish a trade union
according to the law, develop union activities and protect the
legal rights of the workers.
The Cooperation Company shall supply the trade union the
essential conditions for its activities.
16. DURATION OF THE CONTRACT
(52) The duration of the Contract is 15 years calculated from the
date of the issuance of the business licence of the Cooperation
Company.
Where agreed by both parties and resolved unanimously by the
Board of Directors of the Cooperation Company, the Contract can
be extended by applying to the original approval authorities six
months prior to its expiry.
17. HANDLING OF ASSETS UPON TERMINATION
(53) When the Contract expires or is terminated prior to the expiry
date of the Contract, the Cooperation Company shall liquidate
its assets, deal with creditors' rights and liabilities
according to the legal procedures.
(54) Upon expiry of the Contract or its early termination, the
assets, creditors' rights and liabilities of the Cooperation
Company shall belong to and shall be shared in the following
format:-
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The Property shall still belong to Party A. Party B shall be
responsible for the full repayment of creditors' rights and
liabilities of the Cooperation Company within the scope of its
registered capital contribution, and after which other assets
(including machinery and equipment) shall belong to Party B.
Party A shall not be responsible for any creditors' right or
liabilities of the Cooperation Company.
18. APPLICABLE LAW
(55) This Contract is governed and protected by PRC law.
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19. RESOLUTION OF DISPUTE
(56) When there is any dispute relating to the performance of this
Contract between the parties, it shall be resolved by
negotiation or mediation. If it is not resolved through
negotiation or mediation, it shall be submitted to the China
International Economic and Trade Arbitration Commission
(Shenzhen Branch) for arbitration. The arbitration award is
final and binding on both parties and shall be performed by all
parties according to the award. Arbitration fees shall be borne
by the losing party.
(57) During the process of arbitration, this Contract shall continue
to be performed other than that part in dispute and under
arbitration.
20. EFFECT OF CONTRACT AND MISCELLANEOUS
(58) Supplementary documents prepared in accordance with particular
principles of this Contract include the Articles of Association
of the Company which constitute part of this Contract. If there
is any conflict with the abovementioned supplementary documents
and this Contract, this Contract shall prevail.
(59) This Contract and its supplementary documents must be submitted
to the approval authorities for approval and shall take effect
from the date of the approval.
(60) If the parties communicate by cable or telex for matters
relating to the responsibilities and rights of any one party,
the other party shall also be notified by mail. The registered
addresses of the parties set forth in this Contract shall be
their correspondence addresses.
(61) This Contract is signed by the respective legal representatives
of the parties in Shenzhen, on 28th May 1995.
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Party A : Gushu Economic Party B : Xxx Xxxx Printing
Development Holdings Co. Ltd. (Chop)
Company (Chop)
Legal Legal
Representative: Jiang Xxxx Xxxx Representative : Wu Xxx Xxx
28th May 1995
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SCHEDULE 1
HOUSING/PROPERTY USAGE AREA
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No. 6 Zhuao Factory Factory 5,160.90m(2)
Xxxxx Xxxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxxxx
Xx. 00 Factory Factory 1,854.44m(2)
Xxxxx Xxxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxxx
Xx. 00 Factory Factory 6,750.00m(2)
Xxxxx Xxxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxxx
Xx. 00 Xxxxxxxxx Xxxxxxxxx 1,188.00m(2)
Gushu Village
Xxxxxxx Xxxx
Xxxxx Xxxxxx
Xx. 00 Xxxxxxxxx Xxxxxxxxx 3,250.80m(2)
Gushu Village
Xixiang Town
Baoan County Warehouse 4,827.80m(2)
Gushu Village
Gaohui Manufacturing factory
Gushu Village
Xixiang Town
Baoan County
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Total area : 23,031.94m(2)
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SCHEDULE 2
Matters below shall be resolved unanimously by the Board of Directors:
1. Enactment and amendment of the articles of association of the
Cooperation Company;
2. Termination or dissolution of the Cooperation Company;
3. Increase or transfer of the registered capital of the Cooperation
Company;
4. Merger of the Cooperation Company with other economic organisations.
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