Shareholders' Agreement on Business Restructuring
among the Farming Bureau, the Registrant and Billion
Luck dated March 3, 2000
The undersigned officer of China Resources Development, Inc., hereby represents
that the following is a fair and accurate English translation of the original
Chinese version of the Shareholders' Agreement on Business Restructuring among
the Farming Bureau, the Registrant and Billion Luck dated March 3, 2000.
/s/ Xxxx Xxx On
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Xxxx Xxx On
Secretary and Financial Controller
SHAREHOLDERS' AGREEMENT ON BUSINESS RESTRUCTURING
Parties involved:
General Bureau of Hainan State Farms (the "Farming Bureau")
Address: Nongken Street, Xiuying Caobo, Haikou City, Hainan Province, People's
Republic of China.
China Resources Development, Inc., ("CRDI")
Address: Room 2005, Universal Trade Xxxxxx, 0-0X Xxxxxxxxx Xxxx, Xxxxxxx,
Xxxx Xxxx.
Billion Luck Company Ltd. ("Billion Luck")
Address: The Cregue Buildings, P.O. Box 000, Xxxx Xxxx, Xxxxxxx, Xxxxxxx
Xxxxxx Xxxxxxx.
WHEREAS, Hainan Zhongwei Agricultural Resources Co. Ltd. ("HARC") was
incorporated on June 28, 1994. The parties to this Agreement represent all
shareholders of HARC. Farming Bureau owns 39% shares of HARC, CRDI owns 5%
shares of HARC and Billion Luck owns 56% shares of HARC.
WHEREAS, the principal businesses of HARC, which are the distribution
of natural rubber and procurement of materials and supplies, have been carried
out through its wholly-owned subsidiaries, First Supply, Second Supply and Sales
Centre, since its incorporation. All parties agree that the performance of
distribution of natural rubber and procurement of materials and supplies
businesses was not satisfactory with reported losses following the occurrence of
Asian financial crisis. It is estimated that the operating environment of the
above businesses persists in the foreseeable future. Accordingly, it is in the
shareholders' interest to cease the operation of these businesses with
unsatisfactory prospect. Any assets that become excessive after the cessation of
businesses shall be sold. HARC desires to transfer the assets and the
corresponding liabilities of First Supply, Second Supply and Sales Centre to
Farming Bureau. Farming Bureau, HARC, First Supply, Second Supply and Sales
Centre shall enter into a separate "Assets and Staff Transfer Agreement" in
accordance with the provisions of this Agreement.
WHEREAS, the purpose of the restructuring is to abandon businesses with
operating losses and shift the funds to those businesses with stable and good
return in order to improve the overall operating efficiency.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
The headings used in this Agreement are given for convenience only and shall not
affect the interpretation of this Agreement.
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Unless otherwise specified, the followings shall be referred as:
"Effective Date" are to the meaning of the provisions under Article 9 of
this Agreement.
"Base Date" are to December 31, 1999.
"Accounting Standard of PRC" are to the accounting standard, rules and
regulations as adopted in the People's Republic of China.
"Net Assets Value Transferred" are to the meaning of the provision under
Article 1.4 of Assets and Staff Transfer Agreement.
"First Supply" are to First Goods And Materials Supply And Sales
Corporation.
"Second Supply" are to Second Goods And Materials Supply And Sales
Corporation.
"Sales Centre" are to Rubber Sales Centre.
"Transferors" are to HARC, First Supply, Second Supply and Sales Centre,
collectively.
"Assets" are to all assets, rights, contracts, etc., which are transferred
by the Transferors to Farming Bureau. The details of which are listed out in
"Statement of Assets and Liabilities" as appended in the Assets and Staff
Transfer Agreement.
"Liabilities" are to all liabilities, which are transferred by the
Transferors to Farming Bureau. The details of which are listed out in "Statement
of Assets and Liabilities" as appended in the Assets and Staff Transfer
Agreement.
"Assets and Staff Transfer Agreement" are to agreement that is signed by
HARC, First Supply, Second Supply, Sales Centre and Farming Bureau (see Exhibit
1).
"Statement of Assets and Liabilities" represents the contents shown in the
Exhibit to the Assets and Staff Transfer Agreement.
"This Agreement" are to all provisions in this Agreement and its Exhibits.
"Farming Bureau" are to General Bureau of Hainan State Farms, including its
wholly owned subsidiaries, branches, divisions and other legal entities.
"Records" are to the files, records, information, technical know-how or
other information with business values which relate to the assets and
liabilities transferred.
"Transferred Staff" are to the redundant staff of the Transferors who are
employed by Farming Bureau.
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"Cash and Bank Balances" are to cash and bank balances included in the
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement.
"Accounts Receivable" are to accounts receivable included in the Statement
of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement.
"Accounts Payable" are to accounts payable included in Statement of Assets
and Liabilities as appended in the Assets and Staff Transfer Agreement.
"Other Receivables" are to other receivables and prepayments included in
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement, including but not limit to purchase deposits paid.
"Other Payables" are to other payables and accrued expenses included in the
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement, including but not limit to other payables, accrued staff welfare
expenses and taxes payable.
"Long-Term Investments" are to long-term investments included in the
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement.
"Fixed Assets" are to fixed assets included in the Statement of Assets and
Liabilities as appended in the Assets and Staff Transfer Agreement.
"Inventories" are to inventories included in the Statement of Assets and
Liabilities as appended in the Assets and Staff Transfer Agreement.
"Contracts" are to all written and verbal contracts transferred to Farming
Bureau, including the contracts between the Transferors and the Transferred
Staff.
"Responsibilities and Obligations" are to all contractual and legal
responsibilities and obligations with respect to the assets, liabilities and
staff transferred to Farming Bureau.
1 Organization Restructuring
1.1 First Supply, a subsidiary of HARC, all divisions of which, including
Finance Division, Rubber Division, Fuels and Chemical Division,
Production Materials Division, Automobiles Trading Division and
Transportation Division shall cease operation from the Effective Date.
1.2 Second Supply, a subsidiary of HARC, all divisions of which, including
Finance Division, Rubber Division, Fuels and Chemical Division,
Production Materials Division, Automobiles Trading Division and
Transportation Division shall cease operation from the Effective Date.
1.3 Sales Centre, a subsidiary of HARC, shall cease operation from the
Effective Date.
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1.4 The Investment Management Division of HARC shall be responsible to
allocate the funds to other businesses and to coordinate the
establishment of any new subsidiaries or joint ventures.
1.5 The Board of Directors and management team of HARC shall be responsible
for the following matters:
(1) to coordinate the transfer of assets and staff so that all
provisions of this Agreement can be executed successfully.
(2) to formulate and carry out a detail action plan for the
establishment of the aforementioned subsidiaries and joint venture
in Article 1.4.
(3) to amend and formulate the management system of HARC and its
subsidiaries.
(4) to adjust and consolidate the accounting records of HARC and its
subsidiaries.
(5) to appoint the executive management team of HARC and its
subsidiaries.
(6) amend and prepare the articles of associations of HARC and its
subsidiaries.
1.6 Any shareholders of HARC shall have the right to employ an independent
accountant to audit the adjusted accounting records.
2 Transfer of Staff
2.1 All existing staff of HARC shall continue to be employed but be
reallocated to new positions following the corporate restructuring
exercise.
2.2 All the staff of First Supply, Second Supply and Sales Centre who are
redundant under this Agreement shall be re-employed by Farming Bureau.
But HARC and Farming Bureau shall take other appropriate procedures by
mutual agreement to deal with those staff whom Farming Bureau is not
willing to employ.
2.3 HARC, First Supply, Second Supply and Sales Centre shall terminate the
employment relationships with the Transferred Staff in accordance with
the contract terms and in compliance with all the legal requirements. The
Transferors and Farming Bureau shall take all reasonable steps in
obtaining the acceptance from the Transferred Staff. The Farming Bureau
shall employ the Transferred Staff on reasonable terms of which the
remuneration shall not be less than that of the existing staff of Farming
Bureau with comparable position and qualification.
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2.4 The Farming Bureau shall assist to resolve any disputes arising in the
course of termination of employment relationship between the Transferred
Staff and HARC, First Supply, Second Supply or Sales Centre.
2.5 The insurance contracts of the Transferred Staff shall also be
transferred to Farming Bureau at the same time when the Transferred Staff
are employed by Farming Bureau.
2.6 The Farming Bureau shall reimburse the Transferors of any redundancy
payments that are required to be paid by the Transferors to the
Transferred Staff in accordance with the legal requirements and
employment contract terms.
3 Transfer of Assets and Liabilities
3.1 In the process of business restructuring, any assets that become
excessive after the cessation of businesses together with the respective
liabilities shall be transferred by HARC, First Supply, Second Supply and
Sales Centre to Farming Bureau. For this purpose, the parties involved
shall enter into a separate Assets and Staff Transfer Agreement. (shown
as an Exhibit). Details of the transferred assets are listed in the
Statement of Assets and Liabilities.
3.2 All parties to this Agreement shall take all legal procedures to ensure
that the Assets and Staff Transfer Agreement be signed by the Transferors
and Farming Bureau, and that all Assets and Liabilities shown in the
Statement of Assets and Liabilities, which is appended to the Assets and
Staff Transfer Agreement, be transferred to Farming Bureau.
3.3 Except for the Liabilities, Responsibilities and Obligations that are
directly corresponded to the Assets transferred, Farming Bureau shall not
be responsible for any other liabilities, responsibilities and
obligations that have already existed before the transfer and shall be
borne by the Transferors.
3.4 The transfer methods for all Assets and Liabilities shall comply with the
legal requirements governing the transfer procedures.
3.5 The Farming Bureau shall be responsible for the recovery of all Accounts
Receivable. The Transferors shall provide all necessary assistance and
records for the collection of Accounts Receivable on the condition that
all costs and expenses incurred thereon by the Transferors shall be borne
by the Farming Bureau.
3.6 Except for the contents which have already been disclosed to Farming
Bureau, the Transferors shall be responsible for all losses and expenses
arising from any disputes on the assets right with the third parties of
Assets and Staff Transferred
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Agreement if the disputes relate to the events that have already existed
before the Base Date and the Farming Bureau shall not be responsible for.
Any such losses incurred by Farming Bureau thereon shall be compensated
by the Transferors. If the disputes arising from the events that occur
after the Base Date and the Transferors shall not be responsible for, the
Farming Bureau shall bear all expenses and losses incurred thereon.
3.7 Except for the contents which have already been disclosed to Farming
Bureau, the Transferors shall bear all expenses and losses arising from
claims of any mortgages or rights of lien on the transferred assets by
the third parties of Assets and Staff Transferred Agreement if these
mortgages or rights of lien have already existed before the Base Date and
the Farming Bureau shall not be responsible for. Any expenses and losses
incurred by Farming Bureau thereon shall also be compensated by the
Transferors. If the mortgages or rights of lien on the transferred assets
are created after the Base Date and the Transferors shall not be
responsible for, the Farming Bureau shall bear all the expenses and
losses incurred thereon.
3.8 The Transferors shall not warrant the quality of any tangible assets
transferred, including but not limit to, Fixed Assets, Inventories, etc.
For those items which are specifically requested by the Farming Bureau
not to be bound by this provision before the Assets and Staff Transfer
Agreement becomes effective, they shall be handled separately by all
parties to Assets and Staff Transfer Agreement.
3.9 Any losses or consequences resulting from litigation or government
actions in relation to the Assets and Liabilities transferred shall be
borne by the Farming Bureau if the results of such litigation and
government actions are not yet finalized before the Base Date. For those
items which are specifically requested by the Farming Bureau not to be
bound by this provision before the Assets and Staff Transfer Agreement
becomes effective, they shall be handled separately by all parties to
Assets and Staff Transfer Agreement.
3.10 Notwithstanding other provisions in this Agreement, the amounts due by
the Farming Bureau's subsidiary farms and related companies to the
Transferors shall be taken over by the Farming Bureau. Any amounts
received from the Farming Bureau's subsidiary farms and related companies
in relation to the above loans by the Transferors after the Base Date
shall belong to the Farming Bureau. The above loans shall be used to set
off the amounts due by the Transferors to the Farming Bureau or shall be
settled in cash when the loans are taken over by the Farming Bureau.
3.11 The Farming Bureau represents and warrants that it clearly understands
and has assessed the conditions and risks associated with the Assets and
Liabilities transferred by the Transferors. Farming Bureau also warrants
that it shall bear all the rights, returns, risks and obligations
associated with the transferred assets and liabilities after the Base
Date. After the Base Date, the Farming Bureau shall not tender any claims
and requests to the Transferors, on the grounds that there is any changes
in the
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conditions or risks on the Assets or Liabilities, or on any matters in
relation to the Obligations and Responsibilities associated with the
Assets and Liabilities.
4 Payment
4.1 Except for that provided for in Article 3.10 of this Agreement, Farming
Bureau shall pay to the Transferors the Net Assets Fair Value in cash, or
deduct the balances owed by HARC to Farming Bureau and its subsidiary
farms by the Net Assets Fair Value. In the event that the transfer
represents net liabilities balance, the net liabilities balance shall set
off the balance due by the Farming Bureau to the Transferors.
4.2 If the transfer represents net assets balance, the Farming Bureau shall
pay the Net Assets Fair Value to a designated account of the Transferors
as instructed by the Transferors within 120 days from the date of signing
of the Assets and Staff Transfer Agreement.
5 Transfer of Contracts
5.1 The Transferors shall transfer the Contracts associated with the Assets
and Liabilities to Farming Bureau.
5.2 As soon as the Assets and Staff Transfer Agreement becomes effective, the
Transferors' rights and obligations on the Contracts shall terminate as
of the Base Date, no matter whether the legal procedures for the transfer
of contracts from the Transferors to the Farming Bureau have been
completed or not. After the Base Date, all the rights and obligations
arising from the actions taken by the Transferors for the fulfillment of
the Contracts shall belong to the Farming Bureau.
5.3 The Transferors shall have the obligations to provide the conditions to
the Farming Bureau for the fulfillment of the Contracts. However, the
Transferors shall not oblige to compensate Farming Bureau for any losses
incurred by Farming Bureau resulting from the fulfillment of the
Contracts. For those contracts which are specifically requested by the
Farming Bureau not to be bound by this provision before the Assets and
Staff Transfer Agreement becomes effective, they shall be handled
separately by the respective parties.
6 Records
6.1 The Transferors shall transfer all the relevant information and records
in relation to the Assets and Liabilities to the Farming Bureau.
6.2 The Records transferred shall limit to those which are kept by the
Transferors as of the Effective Date. The Transferors shall not warrant
or compensate for the incompleteness and incorrectness of the Records
transferred, but shall give reasonable assistance on their rectification
if requested by Farming Bureau. All the costs incurred by the Transferors
thereon shall be borne by Farming Bureau.
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7 Taxes and Charges
7.1 For the taxes and government charges in relation to the holding or usage
of the assets, the Transferors shall borne those amounts which are
accounted for before the Base Date in accordance with the Accounting
Standard of PRC; whereas the Farming Bureau shall borne those amounts
which are accounted for after the Base Date.
7.2 Any taxes and government charges arising from the transfer of assets
shall be borne by the respective parties in accordance with the legal
requirements. All other expenses shall be shared between the Transferors
and Farming Bureau on a reasonable basis.
8 Insurance
8.1 The beneficiary of all insurance contracts in relation to the assets
transferred purchased by the Transferors shall be changed to Farming
Bureau. Any insurance compensation received by the Transferors before the
completion of the transfer process shall be re-paid to Farming Bureau.
8.2 For the insurance premium which has already been paid by the Transferors,
the Transferors shall borne those amounts which are accounted for before
the Base Date in accordance with the Accounting Standard of PRC; whereas
the Farming Bureau shall borne those amounts which are accounted for
after the Base Date.
9 Effective Date
This Agreement shall become effective and binding on all parties on
January 1, 2000.
10 Conditions
10.1 As of the Effective Date of this Agreement, one party shall present to
the other parties the following documents:
(1) This Agreement shall be signed by the Annual Meeting of
Shareholders, Board of Directors or other authorized persons and
accompanied with the duplicates of all necessary and signed
documents or resolutions in order to make this Agreement
effective, in accordance with the Articles of Associations and the
legal requirements,
(2) The duplicates of other documents, certificates or approval
letters as are required in accordance with laws and the
requirements of the relevant government authorities.
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(3) Signed Assets and Staff Transfer Agreement.
11 Respective Parties' Representations and Warranties
11.1 All parties to this Agreement are legally incorporated and existed legal
persons and have the authority to conduct businesses, to owe debts
independently, to sign contracts and have complete civil capability.
11.2 This transfer is executed within the legal scope of businesses of
respective parties.
11.3 This Agreement is signed by the legally authorized persons of respective
parties.
12 Confidentiality
In the process of executing this transfer, all parties to this Agreement
shall not disclose any information to other third parties unless the
information is disclosed in compliance with the legal requirements.
13 Other Provisions
13.1 The provisions of this Agreement overrule other contradictory provisions
of any other contracts or agreements entered among the parties to this
Agreement
13.2 The Chinese version of this Agreement is the only valid version.
13.3 This Agreement is signed on March 3, 2000.
General Bureau of Hainan State Farms
/s/ Xxx Xx Xxxx
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By: Xxx Xx Xxxx, Director
China Resources Development, Inc.
/s/ Xxx Xxxxx Xx
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By: Xxx Xxxxx Xx, Director
Billion Luck Company Ltd.
/s/ Xxxx Xxx On
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By: Xxxx Xxx Xx, Director
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