EXHIBIT 10.3
According to the laws and rules of China, the Joint Enterprise agreement is
signed in September 10, 1994 and the content of this agreement is as follow:
A) Involved parties
1) Dongguan Xxxx Xx Trading Company (hereafter name "Party A")
Address: Dongguan Xxxx Xx Zhen, Dongguan
Representative: Luk Yam Fai Title: Manager Nationality: China
2) Creative Master Limited (hereafter name "Party B")
Address: Flat A, 8/F., Xxxxx Ind. Bldg., 00 Xxxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxx, HK.
Representative: Xxxx Chek Pui Title: Manager Director Nationality: China
B) Joint Venture Enterprise
Both parties agree to set up a Joint Enterprise, named "Dongguan Changying Toys
Factory Co. Ltd.".
Address: Dongguan Xxxx Xx Xxxx, Dongguan
Representative: Xx. Xxx Xxxx Title Managing Director
Both parties agree that this Joint Enterprise business will last for 12
years, which will be effective on license issue day
The Joint Enterprise act as a corporate of the Peoples Republic of China.
It should obey the rules and regulation of China
C) Condition of cooperation and split of profit
Party A let 4,000m/2/ factory plant and 1,500 m/2/ dormitory.
Party B invest HK$3.8million, including facility asset HK$3million, floating
asset HK$0.8million.
After the verification by a registered accountant on the investment of Party
B, the Joint Enterprise will issue a certificate of investment for Party B.
After the termination of the agreement, Party B will restore all the facilities
(except depreciation). The rent of the factory plant and dormitory (let by Party
A) is RMB$10m/2//month and RMB$8m/2//month (Starting from the 4/th/ year, the
rent will increase 10% in every 3 years). The Joint Enterprise will pay the rent
to Party A, in which such expenses should be considered as expenditure, instead
of investment.
The profit of the Joint Enterprise (after deducting the cost and taxes) will
be shared between Party A and Party B in the proportion of 10% and 90%
respectively. The loss will also be shared in such proportion.
If Party B want to restore the profit back to HK, it should follow the
regulation of China by opening a foreign currency account in Dongguan province
bank and send the money to a bank appointed by Party B.
D) Production and Sales of products
Joint Enterprise produces 6,000 tons metal plastic toys annually. 80% of the
products will be exported (responsible by Party B) and the remaining 20% will be
sold in China (responsible by Joint Enterprise). The price of all the products
should be the same, which is calculated by summing the cost of the product and
some reasonable profit. The profit will be re-considered bi-annually by the
Board of Directors.
If it is possible, the facilities, materials, etc should be purchased in
China. If it is allowed to import these items, the Joint Enterprise can appoint
another party or ask Party B to purchase these items from other countries. The
prices should be accepted by both parties.
If the facilities are purchased by Party B from other countries, it will be
the responsibility of Party B to send some technicians to teach or offer
training program for the workers.
E) Management
The Board of Directors is formed by the members of both parties. It possesses
the highest authorities, in which it is formed by 3 persons (1 from Party A and
2 from Party B). The Managing Director (1) and the Vice Managing Director (1) is
appointed by Party B and Party A respectively. The remaining one is a Director.
The tenure of the Directors will last for 4 years. The directors can hold the
posts for another term after being re-elected. Their rights and responsibilities
are listed clearly in the Joint Enterprise Agenda
The Board of Directors appoints 1 manager and 1 assistant manager. They are
responsible for executing all the decisions made by the Board of Directors.
Their right and tenure are listed clearly in the Joint Enterprise Agenda. If it
is found that there is misconduct or serious mistakes made by the either
manager, the Board of Directors has the right to terminate their jobs.
F) Wage and Welfare
The Board of Directors has to decide the wage, subsidies, award, etc of the
staff. Such wage/welfare should be determined according to the instruction of
the Chinese Government and the real price level of Dongguan province.
The Joint Enterprise must join a Dongguan insurance company for the
Employees' Compensation Scheme.
G) Finance, Account and Foreign Currencies Management
The accounting system must comply with the system of the Peoples Republic of
China and the rules of the Tax Department, and use RMB as the accounting unit.
The expenses of all the equipment and material will only be effective with an
invoice. For those invoices made outside China or in HK/Macau must accompany
with China custom declaration and the rate of custom.
The Joint Enterprise can open a foreign currencies account and RMB account in
one of the banks in Dongguan province. This bank has the right to go through all
the expenses of and
supervise the Joint Enterprise. If Party B want to restore the money to other
countries, it must be handled by the captioned bank.
H) Registration, Taxation and Insurance
The Joint Enterprise must apply registration license from the China
Industrial Administrative Department. It should also register its taxation in
the Tax Department. The payment of tax must comply with the tax system of China.
The China Insurance Company (Dongguan province branch) is the only authority
in offering the insurance for the Joint Enterprise.
I) Import of Material
The equipment and material, and the products must be imported or exported
through customs of Guangdong
J) The Extend of this Agreement
The investment amount of Party B must be paid fully within 6 months after
the agreement is effective. If Party B cannot pay fully and cannot provide
sufficient reasons, it will be considered as a breach of contract, meaning that
Party B is willing to terminate the agreement. On the other hand, if Party B
cannot pay fully but with sufficient reasons, it may ask for extending the
payment period for 1 month. If Party B still cannot pay, it will also be
considered as a breach of contract and Party B is willing to terminate the
agreement. If these occur, the party, which still keep its promise, can ask for
the termination of the agreement and ask for remedy/compensation.
None of the parties can terminate the agreement with the consent of other
party. Under special condition, if one of the parties want to terminate the
agreement, it must inform the other party 6 months before. If any of the party
terminate the agreement without the consent of other parties, this party will be
responsible for compensating the damages or loss of the other party.
K) Unpredictable Event
Since the occurrences of earthquake, typhoon, flood and war are
unpredictable, any party (say Party A) faces these events must inform the other
party (say Party B) immediately. At the same time, Party A must, within 15 days,
inform party B the detail of the unpredictable event (with sufficient evident
provided by the local authority) which causes it unable to implement its
responsibilities. Both parties has to decide whether the agreement should be
terminated or not, or to exempt some of their responsibilities.
L) Trademark of the products
Both parties have the right to decide the trademark and the usage of the
products, but they should follow the registration procedures of the countries in
which their products are to be sold.
M) Arbitration
If the argument between the parties cannot be solved by
coordination/cooperation, the China Commerce and Trading Arbitration Council
will be involved. Both parties must follow the decision made by this Council
N) Supplementary rules
This agreement will be effective after being signed by the two parties. If
the instruction of this agreement is inadequate, the parties can add some other
instructions, which should then be approved by the authorized organization
