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IN RELATION TO THE ESTABLISHMENT OF GUANGHUI HIGHWAY DEVELOPMENT COMPANY LIMITED
COOPERATIVE CONTRACT
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(TRANSLATION)
20th December 1996
Huizhou
TABLE OF CONTENTS
CHAPTER 1 GENERAL PROVISIONS
CHAPTER 2 DEFINITIONS
CHAPTER 3 PARTIES TO THE COOPERATIVE COMPANY
CHAPTER 4 ESTABLISHMENT OF THE COOPERATIVE COMPANY
CHAPTER 5 THE PURPOSE OF COOPERATION AND SCOPE OF BUSINESS
CHAPTER 6 TOTAL INVESTMENT, REGISTERED CAPITAL AND CONDITIONS PRECEDENT
CHAPTER 7 BOARD OF DIRECTORS
CHAPTER 8 MANAGEMENT OFFICE
CHAPTER 9 COOPERATIVE COMPANY TENURE
CHAPTER 10 THE INCOME OF THE COOPERATIVE COMPANY AND ITS ALLOCATION
CHAPTER 11 LABOUR MANAGEMENT
CHAPTER 12 FOREIGN EXCHANGE MANAGEMENT
CHAPTER 13 TAX, FINANCE AND AUDIT
CHAPTER 14 TERMINATION AND LIQUIDATION
CHAPTER 15 OTHERS
CHAPTER 1 GENERAL PROVISIONS
Pursuant to the stipulation of the relevant laws and regulations of the
People's Republic of China and a Cooperative Contract in relation to the
establishment of Guanghui Highway Development Company Limited (hereinafter
"Cooperative Contract") on 5 August, 1996 by Huizhou Highway Property
Development Limited (hereinafter "Party A") and Guanghui Highway Project Company
Limited (hereinafter "Party B"), the following Articles of Association is
concluded:
CHAPTER 2 DEFINITIONS
Unless specified in this Articles of Association, the definition of the
following terms are as follows:
2.1 "Approving Authority" refers to the national authority or department which
exercises the approving right of the Cooperative Contract and this Articles
of Association in accordance with the laws and regulations of the People's
Republic of China.
2.2 "Cooperative Company" refers to the Company established by both Parties in
this Articles of Association in accordance with the Cooperative Contract
and this Articles of Association.
2.3 "Director" refers to an individual who is assigned by either Parties to
this Articles of Association and work in the Board of Directors of the
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Cooperative Company.
2.4 "Board of Directors" refers to the highest authority of the Cooperative
Company mentioned in Chapter 7 of this Articles of Association.
2.5 "Cooperative Company Tenure" refers to the tenure stipulated in Chapter 9
in this Articles of Association.
2.6 "Effective Date" refers to the effective date of this Articles of
Association and shall be the day on which the following conditions had been
fulfilled:
(1) This Articles of Association has been formally signed by both Parties;
and
(2) this Articles of Association has been approved by the approving
authority.
2.7 "Force Majeure" refers to earthquake, typhoon, fire, flood, war, starving
or other unforeseen events, and their happening and consequences are
unpreventable and unavoidable.
2.8 "Management Staff" refers to the general manager, deputy general manager,
chief accountant and other management staff appointed by the Board of
Directors.
2.9 "Road Sections of the Project" refers to Jinlong Highway, 71.776 kilometers
in total and is divided into two sections:
Section One:
Starting from ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇'▇ Village (the intersection of Provincial
Expressway Route No. 1914 and National Expressway Route No. 205), through
Gongzhuang, Pingling and ends at Baisha Bridge, Longmen, 44.238 kilometers
in total.
Section Two:
From Yewu Village, Xiaojin Town, Huicheng District, through Donghang,
Liangtian, Taimei, Leigong, ends at ▇▇▇▇▇▇▇▇▇, Boluo County, 27.538
kilometers in total.
The route of the road sections please see Appendix I of the Cooperative
Contract.
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2.10 "Section for initial investment" refers to a section of Jinlong Highway
which is from Baisha Bridge, Longmen, passing through Pingling, to
Gongzhuang, 35 kilometers in total.
2.11 "Toll Booth" refers to Donghang Toll Booth and Pingling Toll Booth on the
road sections of the project or other toll booths agreed to be set up from
time to time by both Parties.
2.12 "Exclusive Operating Rights" refers to the exclusive rights in relation to
the operation, management, maintenance, repair and the collection of toll
fees granted by Government Department in accordance with the laws.
CHAPTER 3 PARTIES TO THE COOPERATIVE COMPANY
3.1 Party A
Name : Huizhou Highway Property Development Company
Place of Registration: Huizhou, Guangdong Province, China
Address : ▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Legal Representation : ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No. : (▇▇▇▇) ▇▇▇▇▇▇▇
3.2 Party B
Name : Guanghui Highway Project Company Limited
Place of Registration: British Virgins Island
Address : ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇.
Legal Representation : ▇▇. ▇▇▇ ▇▇▇ ▇▇▇▇
Fax No. : (▇▇▇) ▇▇▇▇▇▇▇▇
3.3 Qualifications
On the signing date and effective day of this Articles of Association,
each Party shall represent and guarantee to the other Party that:
(1) That Party is established in accordance with the laws of the places of
its establishment and setting up and shall ensure that its existence is
effective with good reputation;
(2) that Party shall have the rights, power and authorization required to
enter into this Articles of Association, and on the effective date, that
party shall have the rights, power and authorization required to fully
execute all the obligations in this Articles of Association;
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(3) that party has taken all necessary steps to ensure that it has the
right to enter into this Articles of Association and its representative of
that Party, of which signature attached, shall have the right to sign this
Articles of Association with a letter of attorney, this kind of signing
shall have the binding power to that Party.
(4) the signing and execution of this Articles of Association does not
infringe contravene and against the provisions of any rules, laws,
regulations, ordinance, any authorization or approvals from government
authorities, or any agreement or articles that that Party is one of the
signing parties.
(5) There is no litigation, arbitration, or other judicial, administration
or government investigation towards that Party which are pending or known
by that Party and going to happen soon.
(6) Disclosed all information received from the Chinese Government which
may affect the other party to fulfill its obligations of this Articles of
Association; and the disclosure of those information or documents,
representations may affect the willingness of the other party to sign the
document. And also the information that that party has supplied to other
party contains no material misstatement or has not made any information
which leads to misunderstanding.
(7) Disclosed all information received from the Chinese Government which
may affect the other party to fulfill its obligations of this Cooperative
Contract; and the disclosure of those information or documents,
representations may affect the willingness of the other party to sign the
document. And also the information that the party has supplied to other
party contains no material misstatement or has not made any information
which leads to misunderstanding.
CHAPTER 4 ESTABLISHMENT OF THE COOPERATIVE COMPANY
4.1 In accordance with the "Law of Sino-foreign Cooperative Company in the
People's Republic of China" and other relevant laws and regulations, both
Parties agree to establish a sino-foreign Cooperative Company in Huizhou,
Guangdong Province, China according to the provisions stipulated in the
Cooperative Contract and this Articles of Association. The Cooperative
Company shall comply with the laws and regulations in China and its legal
rights and benefits are protected by Chinese laws.
4.2 The name of the Cooperative Company is "Guanghui Highway Development
Company Limited".
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4.3 The Cooperative Company shall register at Huizhou, Guangdong Province,
China. Its registered address shall be ▇▇. ▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇.
4.4 The establishment date of the Cooperative Company shall be the date on
which the business license of the Cooperative Company is issued.
4.5 The organization form of the Cooperative Company shall be a limited
liability company and the Cooperative Company shall be an enterprise legal
person in the People's Republic of China. The Cooperative Company shall be
liable to the liabilities of the Cooperative Company with all of its
assets. Each Party to shall be liable to the Cooperative Company within the
limit of the capital subscribed by it. Both Parties shall not be liable for
the liabilities (individual or joint liabilities) of the Cooperative
Company directly.
4.6 All activities of the Cooperative Company in the People's Republic of China
shall be governed by the laws and regulations of the People's Republic of
China.
CHAPTER 5 THE PURPOSE OF COOPERATION AND SCOPE OF BUSINESS
5.1 The purpose of the Cooperative Company is in comformity with the principle
of enhancing the economic cooperation and technical exchanges, to reform
the road sections of the project, improve transportation conditions,
traveling safety and smooth traffic on the road sections, enhance the
economic relationship between Huizhou District and Beijing City, Hebei
Province, Henan Province, Hubei Province, Guangzhou, Shenzhen, Heyuan,
Zhuhai Delta, Yuebei, Gannan, Minxi, etc. and to ensure satisfactory
investment benefits of both Parties from the collection of vehicles passing
fees, fees from supplementary facilities and the fees from other aspects by
adopting technical and management experience of international standards.
5.2 The business scope of the Cooperative Company includes: Providing
improvement, management, operation and maintenance services for the "Road
Sections of Initial Investment".
5.3 Unless indicated in the Cooperative Contract, "management and operation"
also include the sole rights of handling vehicles passing fees and
collecting other fees.
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CHAPTER 6 TOTAL INVESTMENT, REGISTERED CAPITAL AND CONDITIONS PRECEDENT
6.1 The total investment of the Cooperative Company shall be RMB560,000,000
(USD67,300,000) while the total initial investment shall be USD29,800,000.
6.2 The registered capital of the Cooperative Company shall be USD11,920,000.
Party A shall contribute USD2,384,000, accounting for 20% of the registered
capital and shall be contributed in assets. Party B shall contribute
USD9,536,000, accounting for 80% of the registered capital.
6.3 Both Parties agree the following conditions as the investment into the
Cooperative Company:
Party A: The rights and assets of Jinlong Highway (from Longmen to Qingxi,
7 kilometers in total), valued at USD5,960,000.
Party B: USD23,840,000 in cash.
6.4 The capital contributed by Party A shall be transferred to the Cooperative
Company on the date of its establishment. The capital contributed by Party
B shall be paid in the following ways after the establishment of the
Cooperative Company and the provisions of the following documents by both
Parties: the first installment of USD5,000,000 shall be paid within a month
while the second installment of USD4,536,000 shall be paid within three
months. The balance of the investment shall be paid according to the
construction progress. Party A shall provide evidence on quality and the
completion time during the examination of the construction work.
(1) The valuation of the contribution by Party A shall be recognized
by the State-owned Assets Administration Bureau and Party B shall
agree the estimated value for Party A made by the above Bureau.
(2) The exclusive rights for not less than 30 years granted by the
relevant government department to both Parties and approval of capital
contribution of that kind of operation right of Party A.
(3) An Agreement on Supervision of the Specified Bank Account signed
by both Parties and the Bank.
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(4) Party B satisfies Party A's ability of the payment of investment
return (see 10.1, 10.2 and 10.3).
6.5 After the contribution of capital by both Parties, an accountant registered
in the People's Republic of China shall be appointed by the Cooperative
Company to verify the capital contributed and a report of it shall be
provided. A capital contribution certificate shall be issued by the Board
of Directors of the Cooperative Company in the name of the Cooperative
Company.
6.6 All assignment shall be approved by the approving authority. After its
approval, the Cooperative Company shall proceed the procedures for changes
from the relevant government authority (other than merge and listing).
6.7 In case any Party to the Cooperative Company assigns all or part of its
cooperation conditions and rights, the other Party to the Cooperative
Company shall have the priority to have the right of assignment (other than
merge and listing).
CHAPTER 7 BOARD OF DIRECTORS
7.1 In addition to its other obligations set forth in this Cooperative
Contract, Party A shall be responsible for the following matters:
(1) Handling of applications for approval, registration, the business
license, tax registration and other matters concerning the establishment of
the Cooperative Company from the relevant departments in China;
(2) Providing conditions of capital contribution and cooperation according
to the stipulation in Article 6 of this Cooperative Contract;
(3) Assisting the worker of Party B and the staff of the Cooperative
Company in applying for the entry visa, working permit and processing their
traveling matters;
(4) Responsible for handling other matters entrusted by the Cooperative
Company.
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7.2 The Board of Directors shall be the highest authority of the Cooperative
Company. It shall have the following rights and authority:
(1) Providing conditions of capital contribution and cooperation according
to the stipulation in Article 6 of the Cooperative Contract;
(2) Responsible for handling other matters entrusted by the Cooperative
Company.
CHAPTER 8 REPRESENTATIONS AND WARRANTIES
8.1 The following represenations and warranties are made by Party A to Party B.
(1) The existing Company is legally established by Party A in Accordance
with the laws in the People's Republic of China. It is a enterprise legal
person in the People's Republic of China which solely bears the
liabilities, bear sole responsibility for its profits or losses and holds
an effective business license for enterprise legal person;
(2) Party A is a Company that have the right and ability to develop,
construct, operate and manage Jinlong Highway in accordance with the laws
in the People's Republic of China and have sufficient right and ability to
conclude this Cooperative Contract with Party B and fulfill all the
provisions stipulated in the Cooperative Contract;
(3) Pursuant to the laws in the People's Republic of China and the
authorization from the relevant government departments, Party A shall have
the exclusive operating right on Jinlong Highway at least for 30 years upon
the effective day of this Cooperative Contract. Party A shall have the
right to use the above exclusive operating right as the capital injected
into the Cooperative Company.
(4) There is no mortgage or in any other forms of pledge on the exclusive
operating right of the road section of initial investment of Jinlong
Highway which is contributed by Party A as capital;
(5) A necessary feasibility study for the reconfiguration and management of
the road sections of Jinlong Highway have been proceeded and all the
approval documents from the government as required have been received.
Party A shall provide Party B with all valid documents of the aforesaid
information before the signing of this Cooperative Contract. Party A shall
be responsible for handling all the applications for approval and
registrations (including but not limited to the procedures proceeded in the
department of foreign exchange management) in order to make this
Cooperative Company valid.
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approval documents from the government as required have been received.
Party A shall provide Party B with all valid documents of the aforesaid
information before the signing of this Cooperative Contract. Party A shall
be responsible for handling all the applications for approval and
registrations (including but not limited to the procedures proceeded in the
department of foreign exchange management) in order to make this
Cooperative Company valid.
CHAPTER 9 BOARD OF DIRECTORS
9.1 The date of registration of the Cooperative Company shall be the date of
the establishment of the Board of Directors of the Cooperative Company.
9.2 The Board of Directors shall be the highest authority of the Cooperative
Company. it shall have the following rights and authority:
(1) To determine the operation and investment plans;
(2) to determine the annual financial budget and accounting proposal;
(3) to determine the increase of the registered capital;
(4) to determine the merge, subdivision, change of the form of the
Coopertive Company and dissolution
(5) to determine the establishment of internal management office;
(6) to employ or dismiss the general manager, deputy general manager and
chief accountant and according to the nomination of the general manager, to
employ or dismiss other management staff and to determine their salaries;
(7) to approve the basic management system (including financial system,
accounting system, personnel management, labour management, etc.);
(8) to amend the Articles of Association;
(9) upon the decision of both Parties, other matters which shall be decided
by the Board of Directors
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9.3 The Board of Directors is composed of 9 directors, of which 3 shall be
appointed by party A, 6 by Party B. The term of office for the directors
shall be 3 years, their term of office may be renewed if continuously
appointed by the relevant party. Upon the expiration of the term of office
of a director of any position of a director is vacated, the original
appointing Party shall appoint any other person at any time or appoint a
new director. The new appointment shall be effective after a written notice
had been sent to the Cooperative Company.
9.4 The Board of Directors shall have one chairman and one vice-chairman. The
chairman of the Board shall be appointed by Party B, and its vice-chairman
by Party A. As the chairman is an extremely important position, Party B has
agreed to consult Party A (about reappointment, time of replacement when
the position is filled.
9.5 The chairman of the Board is the legal representative of the Cooperative
Company, his responsibilities are:
(1) To call and hold the Board meetings;
(2) to issue notice and make preparation to implement all the decisions
made by the Board;
(3) to sign the relevant legal documents on behalf of the Cooperative
Company according to the decisions made by the Board of Directors;
(4) to propose or accept the litigation proceedings on behalf of the
Cooperative Company.
The chairman of the Board shall not, without authorization of the Board of
Directors, solely conduct any behavior which has binding effect to the
Board of Directors or/and the Cooperative Company other than the activities
mentioned before.
Should the chairman be unable to exercise his responsibilities for some
reasons, he shall authorize the vice-chairman to represent him in the
execution of the responsibilities of the chairman temporarily.
9.6 The Board of Directors shall convene at least one regular meeting every
year.
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The meeting shall be called and held by the chairman of the Board. The
first meeting shall be held within 45 days after the issuance of the
business license. The chairman may convene an interim meeting based on a
proposal made by two or more directors and a written notice sent to all
directors of the Board of Directors 10 days in advance.
9.7 The meetings of the Board of Directors shall normally be held at the place
of the Cooperative Company, but may be held at other locations or in other
forms when necessary.
9.8 Should the directors be unable to attend the meeting, the chairman shall
appoint a proxy in writing to represent him. The letter of attorney shall
include the scope of authorization. In case any director cannot attend in
person or appoint a proxy to attend the meeting for him, it shall be deemed
as he forfeits his voting right.
9.9 The quorum for a Board meeting shall consist of three-quarters of the
directors. Should the directors or their proxies be less than the quorum,
the Board meeting shall be postponed by 15 days. At that time, no matter
how many directors are present, there is enough quorum and all the
resolution passed shall be valid, unless the absence of the directors is
due to force majeure.
9.10 The Board meetings with quorum shall exercise all right, power to make
decision or descretion which shall be exercised or are given by the Board
of Directors or generally authorized by and Board of Directors.
9.11 Resolutions on the following issues shall be made only after being passed
by the three quarters of directors or passed unanimously by other proxies
present at the Board meeting:
(1) To amend this Cooperative Contract, Attached Agreement and the Articles
of Association of the Cooperative Company;
(2) to change the legal structure of the Cooperative Company, including the
number of shares of the Cooperative Company and the plan of listing,
choosing and change of the name or trademark of the Cooperative Company;
(3) to determine the increase or decrease of the registered capital of the
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Cooperative Company
(4) to determine the increase of the total investment of the Cooperative
Company;
(5) the Cooperative Company merges with other economic organization or any
other form of reorganization;
(6) to establish branches or subsidiaries or other branch institutions;
(7) to sell, assign or in other forms to handle all or part of the assets,
business or right of the Cooperative Company;
(8) to establish or permitted to established any mortgage, pledge, options
or any other th8ird party interest of the property or assets or any portion
of capital of the Cooperative Company;
(9) to extend, suspend, terminate or dissolve the Cooperative Company;
(10) to determine major investment issues of the Cooperative Company.
9.12 The following issues shall be valid after being passed by more than three
quarters of the directors (including their authorized proxies) present at
the Board meetings (except abstention):
(1) Change the business nature or location, establish, expand or close the
business location of the Cooperative Company;
(2) acquire and merge more than 20% interest of other enterprises,
companies or entities;
(3) purchase or handle the stocks from any other companies or other
securities;
(4) approve and amend the annual business plan, annual or quarterly
financial or accounting report and Auditor's report of the Company, and for
any approved budget, examine and approve any expenditure exceeding 10% of
the expense items;
(5) any capital expenses or investment;
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(6) set up or issue any bonds or convertible bonds, or to receive
provisions or loans by the forms other than normal trading.
(7) any loan exceeding RMB1 million or other currencies equivalent to the
amount;
(8) the Cooperative Company shall provide guaranty or other guaranteed
rights and interests or compensation for the third party benefits;
(9) provide any financing arrangement, including loan and economic
subsidies for any individuals, companies, entities, partnerships or other
economic organizations or legal entities;
(10) formulate or amend any contract provisions of the major suppliers
accounting for 15% or more of the purchasing amount of the Cooperative
Company or the main clients accounting for 15% or more of the sales amount
of the Cooperative Company, or to terminate the existing relationship of
those suppliers or clients;
(11) the Cooperative Company (i) concludes, other than normal business
contracts, a single project contract with a value exceeding RMB2 million or
a entire contract with a value exceeding RMB5 million with any person, or
(ii) concludes a single project contract with a value exceeding RMB500,000
or a entire contract with a value exceeding RMB1 million with any Party of
terminate these two kinds of contracts;
(12) the leasing, sale and purchase, reconstruction and/or operation not
according to the original business purpose of the land use right and real
estate such as the plant.
(13) appoint or dismiss and replace the general manager, deputy general
manager and chief accountant;
(14) appoint or replace the auditor;
(15) formulate and amend the legal provident fund, drawing proposal of
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legal public welfare fund and profit distribution proposal;
(16) approve or alter the accounting method or policy;
(17) for any nature of legal, administrative or arbitrary procedure
(excluding legal procedures for the liabilities due to normal operation of
the Cooperative Company or some extreme situation of the loss of the
Cooperative Company and the Cooperative Parties caused by not taking
actions) proposed by any third party, however, for the second situation,
the chairman and/or general manager of the Company shall inform the Parties
on time of the actions taken.
(18) the Cooperative Company formulate, amend or terminate the retirement
scheme, long-term service, compensation or similar arrangement of the
present or retired management staff or employees, and the incentives or
profit sharing plan of any employees.
9.13 The matters arisen from any Board meetings other than the matters mentioned
in 9.11 and 9.12 are decided by ballot and passed by majority.
9.14 The minutes of Board Meetings are written and filed in Chinese. All minutes
of Board Meetings shall be recorded with the name of the directors
attending the meeting, all resolutions in the meeting and agenda. the
minutes are officially filed until all directors having attended the
meeting have signed. The Board of Directors hall deliver a copy of the
minutes to each member of the Board as soon as possible after the end of
the meeting.
9.15 Each director (including the Chairman) shall only have one vote.
9.16 Except for the part-time senior management staff or part-time employees,
all directors shall serve the Cooperative Company without receiving
remuneration. However, the expenses (including travel expenses, living
expenses and other expenses) arisen from the attendance of Board Meeting by
the directors shall be regards as the expenses of the Cooperative Company
and shall be borne by the Cooperative Company.
CHAPTER 10 MANAGEMENT OFFICE
10.1 The cooperative company shall adopt a "General Manager Responsibility
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System" under the supervision of Board of Directors. The cooperative
company establishes an operation management organization to be responsible
for daily management of the company. The management organization employs
one general manager and, one deputy general manager. After obtaining an
agreement from both cooperative parties, the number of deputy general
manager can be increased.
10.2 The selection of general manager shall be carried out according to Party
B's recommendation. If there is only one deputy general manager, the person
who fills this position shall be recommended by Party A. In case the number
of deputy general manager is over one person, the cooperative two parties
shall negotiate the number of people of each side that should be
recommended. General manager and deputy general manager shall be appointed
by Board of Directors. The tenure of employment lasts for 4 years or shall
be decided by Board of Directors. This procedure is applicable for all the
appointment of general manager and deputy general manager in the future
unless there are any other resolutions made in the Board Meeting.
10.3 The responsibilities of the general manager include implementing all
resolutions in the Board Meeting, organizing and managing the daily
management operation of the cooperative company. The general manager is
entitled to appoint several departmental managers to be responsible for the
departmental duties. The departmental managers shall report to the general
manager. Deputy general manager assists the general manager.
10.4 In case the general manager or the deputy general manger practices graft,
seriously neglects his duty or is deliberately negligent, the general
manager or the deputy general manager can be dismissed and replaced anytime
through a resolution from the Board Meeting.
CHAPTER 11 COOPERATIVE COMPANY TENURE
11.1 The tenure of the cooperative company lasts for 30 years, starting from the
day of the establishment of the cooperative company.
11.2 In case the cooperative two parties agree to extend the tenure of
cooperation, the application for the extension of the cooperative period
shall be submitted to the approval authority six months prior the
expiration of the cooperation period. Party A shall assist to gain the
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approval of application.
CHAPTER 12 THE INCOME OF COOPERATIVE COMPANY AND ITS ALLOCATION
12.1 Regarding the contract of the cooperative company, both parties agree to
allocate the income according to the proportion and methods stated below :
Party A and Party B agree that Party B shall inject 80% of the total share
capital. Party B shall have the priority, after the injection of the
capital, to receive an annual return of 22% on its amount of investment for
the first 7 years. (It will be calculated in installment in accordance with
the actual injection amount and the time of injection into the bank account
of the Cooperative Company). Party A shall pay for the Party B quarterly
(i.e. 31st March, 30th June, 30th September, 31st December of each year).
Both parties agree that for the next 10 years (i.e. from the eighth to the
seventeenth year), after the deduction of 15% regular expenses and taxes, ,
70% of the net revenue will be used for dividend distribution (in
accordance with the ratio 2:8). The dividend will be distributed quarterly
(i.e. at the end of March, June, September, December each year). The
remaining 30% of revenue will be used to pay for the interest of the 20% of
the total capital injected by Party A. The interest rate will be 13.5% per
annum. In case Party A cannot receive all the invested principal and
interest within 10 years, both parties agree that the cooperative company
will continue to repay Party A from the seventeenth year onwards. When
Party A has received all the principal and interest, the total revenue of
the cooperative company, having deducted the 15% regular expenses
(including the wages and welfare of the staff at toll booths, maintenance
fee and so on), the cooperative company will allocate it to parties A and B
in accordance with the ratio of their investment.
12.2 Both Parties A and Party B agree to act in accordance with the provisions
of the State Administration Exchange Control. Party B's injection should be
in United States Dollars. The "Cooperative Company" shall be responsible
for exchanging the recoup return and profit into United States Dollars and
remitting to the bank account stipulated by Party B. The exchange risk
shall be borne by the cooperative company. Party A agree to pay Party B the
investment return in United States dollars for the first seven years. The
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profit shared by Party B shall be settled in RMB. Party A shall be
responsible for taking care of all the procedures to exchange RMB into
foreign currency and remitting it to the bank account specified by Party B.
Both parties A and B agree that if the exchange rate of U.S. dollars to RMB
is 1:9.5 or below 1:9.5, then the exchange risk shall be borne by the
cooperative company. If the exchange rate is above 1:9.5, the cooperative
company will apply for an increase of toll fee through a relevant authority
or will extend the operation period.
12.3 The cooperative company has the priority to have the rights of acquisition
for the remaining part of Jinlong Highway. In order to ensure the
cooperative company can pay to all the parties according to the
stipulations in this contract, both parties agree to open a specified bank
account at Huizhou branch of People's Construction Bank for Tongkeng toll
booth, Pingling toll booth and other toll booths in transit set up in the
future or other cooperation company or the toll booths which party A has
the operation right so as to have the collected fee of the toll booths
saved. The usage of the deposit will be supervised by the bank. Party B is
entitled to request the bank use the deposit to pay for Party B first.
CHAPTER 13 LABOUR MANAGEMENT
13.1 The matters of the cooperative company concerning the recruitment,
employment, dismissal, resignation, wages, employee insurance, welfare,
rewards and others shall be handled according to the employment management
provisions of foreign investment enterprise in China and the employment
contract individually signed between the cooperative company and employees.
After signing the employment contract, it should be filed in a local
employment management department according to the regulations.
13.2 Board of Directors shall decide the wages, welfare, social insurance,
travel allowance of the general manager, deputy general manager, senior
management staff and specialist.
13.3 The employees of the cooperation company are entitled to establish a trade
union and to start the activities of the trade union in accordance with the
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stipulations of "Employment Law of People's Republic of China.
CHAPTER 14 FOREIGN EXCHANGE MANAGEMENT
14.1 All matters pertaining to foreign exchange affairs of the cooperation
company shall be handled in accordance with the present regulations and
future effective regulations promulgated by the Chinese Government.
14.2 According to the resolutions of the Board Meeting, the cooperation company
shall open a foreign currencies account and RMB account according in Bank
of China or other financial institutions approved by the People's Bank of
China.
14.3 The wages of the staff abroad and others proper returns of the cooperative
company shall be remitted abroad in accordance with the regulations.
14.4 Under the permission of the law, if the cooperation company receive foreign
currencies from the business, Party A shall be responsible for handling all
the necessary procedures stipulated by the government.
CHAPTER 15 TAX, FINANCIAL AND AUDIT
15.1 In the view of the fact that the business of the cooperative company, which
brings a positive effect to the economy, is to construct and manage the
toll road and the cooperative company has injected a vast amount of capital
and born a high risk, however, the investment return period is long.
Therefore, parties A and B shall strive for obtaining taxes and expenses
privilege from the government at provincial and state level.
15.2 The financial accounting of the cooperative company will be in accordance
with the "People's Republic of China Foreign Investment Enterprise
Management Provisions", "People's Republic of China Foreign Investment
Enterprise Accounting Policy" and the relevant requirements stipulated by
Board of Directors.
15.3 The opening and closing of bank accounts of the cooperative company shall
be jointly signed by the representatives of both parties or the general
manager nominated by Party B and the deputy general manager nominated by
Party A or the chief accountant. The usage of the capital shall be strictly
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conformed to the financial policy passed by Board of Directors. The
expenditure company checks shall be jointly signed by the general manager
and the deputy general manager nominated by Party A or the chief
accountant.
15.4 The general manager shall report the operation situation of the previous
quarter and submit the financial statement of that quarter to the
cooperative partners before the 10th day of the first month of each
quarter. The cooperation parties are entitled to request Board of Directors
or general manager to provide information showing financial situation of
the company anytime.
15.5 Within the first three months of each fiscal year, the general manager
shall prepare the previous year's balance sheet, profit and loss statement
and submit to Board Meeting for examination and approval.
15.6 The fiscal year of the cooperative company shall start from 1st January to
31st December each year. All vouchers, receipts, financial statements and
ledgers shall be written in Chinese.
15.7 The ledgers shall be recorded in RMB. In case the transaction is handled in
foreign currencies, then it will be recorded in foreign currency. The
exchange rate of RMB and foreign currencies will be the mean of the foreign
currencies exchange rate announced by the People's bank of China on the day
of the deal. The monthly financial statement shall be submitted to Board of
Directors within 5 days after the end of the month, quarterly financial
statement within 30 days after the end of the quarter and annual financial
statement within 3 months after the end of the year.
15.8 The cooperative company shall act in accordance with the stipulations of
the "People's Republic of China Sino-foreign Cooperative Operational Law"
to withdraw the legal provident fund and public welfare fund. The
proportion of withdrawal of the legal provident fund and public welfare
fund every year shall be decided by Board of Directors according to the
operation situation of the cooperative company.
15.9 The cooperative company shall employ an international auditors or an
international recognized auditors to audit the accounts of the cooperative
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company. The auditors' report shall be delivered to Board of Directors and
the general manager. If it is necessary to re-audit the account anytime
during the cooperative period, any party shall employ other auditors to
carry out another independent audit. The audit fee will be paid by that
party. If the independent second audit reviews that there are errors in
relevant financial statements and final accounts, the responsible party
shall pay for the audit expenditure of the independent second audit and
double damages to the aggrieved party.
CHAPTER 16 THE AMENDMENT, ALTERATION AND DISCHARGE OF THE CONTRACT
16.1 The amendment of this contract shall be effective only after being signed
by both Parties A and B and the official approval procedures have been
completed.
16.2 The contract can be discharged in advance under the following circumstances
(under this circumstance, the cooperative company can be dismissed):
(1) Either cooperative party purchases all the rights and interests of the
other party;
(2) Both the cooperative parties unanimously agree to discharge the
contract in advance;
(3) Either party is willing to or is forced to announce bankrupt; or starts
to bankrupt, consolidate or carries out liquidation procedures; or the
party has reached an agreeement with the creditors to liquidate all or part
of the debts and the other party of the contract issues a notice of
discharge of the contract in advance.
16.3 Without affecting the effect of the stipulations in Chapter 17, the
contract can be discharged in advance. Under this circumstance, all
property of the cooperative company shall be liquidated (except for the
condition stated in 16.2(I)). During liquidation, the value of the road
section of the project and other auxiliary facilities shall be calculated
according to the book value at the time of liquidation. The book value of
other properties shall be reviewed according to the market price at that
time. The properties after liquidation, having deducted reasonable
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expenses, shall be shared according to the ratio of the registered capital
injected into the cooperative company by the cooperative two parties in
order not to damage the rights and interests of the cooperative company.
CHAPTER 17 LIABILITIES FOR BREACH OF CONTRACT
17.1 Should either Party A or Party B fail to pay on schedule the contribution
in accordance with the provisions stipulated in Chapter 6 of this contract,
the breaching party shall pay 1% of the late payment as a penalty for the
delay for the first month. Should the breaching party fail to pay after two
months, apart from paying 3% of the late payment as a penalty, the other
party shall be entitled to terminate the contract and to seek economic
damages from the breaching party.
17.2 Apart from the situation mentioned in 17.1, should either party breach the
contract or its appendices and/or the stipulations of the Articles of
Association of the cooperative company (including any statements,
warranties, promises) the party shall compensate the other party all the
expenses arisen. The aggrieved party shall be entitled to terminate the
contract anytime in advance.
17.3 The provisions above this condition do not eliminate other stipulations
which the foreign party is based on the provisions and appendix of the
contract. Foreign party requests the guarantor fulfill the obligations to
the Chinese party or obtain the investment return and compensation right
from the specified account on behalf of the Foreign party. The rights
mentioned above are juxtaposed and do not have priority.
CHAPTER 18 THE DISMISSAL AND LIQUIDATION AFTER THE EXPIRATION OF THE TENURE
18.1 The cooperative company shall be dismissed upon its expiration in
accordance with the stipulation in Chapter 9 (except for the extension of
the term of the cooperative contract). Board of Directors of the
cooperative company shall work out the procedures and principles of the
liquidation and nominate candidates to form a Liquidation Committee in
accordance with relevant laws and regulations of the People's Republic of
China.
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18.2 Upon the approval of Board meeting, the Liquidation Committee (including
the representative appointed by both parties) shall sort out all assets,
credits and liabilities of the cooperative company, work out assets and
liabilities statement and financial checklist, put forward the basis on
which the property is to be valued and calculated, and a handling process.
After the payment of all reasonable expenditure, the assets after
liquidation shall be the remaining current assets of the cooperative
company. Parties A and B shall get 20% and 80% of the current assets
respectively and Party A shall get all the remaining fixed assets without
valuation.
18.3 Upon the liquidation, a liquidation report shall be submitted to Board
Meeting for approval by the Liquidation Committee. The Liquidation
Committee shall report to the examination and approval authority and
nullify the registration procedure and hand in the business license for
cancellation from the original registration authority.
18.4 The termination of the contract and the dismissal of the cooperative
company shall not affect any other rights which have been conferred by this
contract, including the rights for litigation and for seeking compensation
for all loss and expenses.
CHAPTER 19 APPLICABLE LAW
19.1 The conclusion, effectiveness, explanation, performance, solution of
dispute are bound by the law of the People's Republic of China.
CHAPTER 20 SETTLEMENT OF DISPUTES
20.1 Any disputes arising from the execution of, or in connection with the
contract shall be settled through friendly consultations between both
parties. In case no settlement can be reached through consultations, the
disputes shall be submitted to the Foreign Economic and Trade Arbitration
Commission in accordance with its rules of procedure. The arbitrative award
is final and binding upon both parties. All expenses arising from the
arbitration shall be borne by the loser.
20.2 During the arbitration process, apart from the section of the contract
which the dispute is arisen, both parties shall continue to fulfill the
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remaining part of the contract.
CHAPTER 21 THE EFFECTIVENESS OF THE CONTRACT AND MISCELLANEOUS
21.1 All terms and conditions stipulated according to the provisions of this
Articles of Association shall be the appendix of this contract.
21.2 The contract and the appendix shall be effective after obtaining the
approval from relevant government authority. This contract is effective on
the day when it is obtained an approval. For matter(s) not being mentioned
in this contract, both parties shall establish a supplementary agreement as
an appendix of this contract.
21.3 When one Party does not exercise certain rights of the contract, it does
not mean that it gives up the rights or the remedies it has. Similarly,
when one party gives up certain rights or is exempted from fulfilling
certain obligations to the other party, it does not imply that this party
gives up its other rights or is exempted from the other obligations to the
other party. The party concerned can exercise the right and demand of
compensation in accordance with the stipulations of the contract and the
other rights and demands of compensation conferred by the law.
21.4 Should either of the parties to the contract be prevented from executing
the contract by force majeure shall notify the other party immediately and
provide a detail report of the event and the demand of exemption to the
other party within 14 days. The party concerned shall try its best to
minimize and make up for the loss through taking measures. The detailed
report shall be enclosed with documents issued by the local notary
organization or relevant government authority to certify the occurrence of
such event as a result of the force majeure. Both parties shall, through
consultations, decide whether to terminate the contract or to exempt part
of the obligations fulfilled by the party affected or to postpone the
execution of the contract in accordance with the effects of the force
majeure brought on the performance of the contract.
21.5 If there is any conflict(s) arisen between this contract and Articles of
Association or other agreements or contracts signed by the two parties
between the cooperative company or the cooperative two parties and Party A
or Party B, all terms and conditions shall be in accordance with this
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contract. If there are any conditions owing to certain reasons that are not
effective or cannot be enforced, they will not affect the legality and
effectiveness of this contract if unanimous agreement is obtained from the
cooperative two parties. Meanwhile, both parties shall amend or correct the
condition(s) which is not effective or unable to execute as soon as
possible.
21.6 Both parties make representation and warranties to the other party. In all
circumstances, each party should disclose all information in relation to
the cooperative company and its operation to other party.
21.7 Notice to either party according to the stipulations in this contract shall
be made by letter and/or fax in accordance with the address stipulated in
Chapter 3 of this contract. If the notice is sent by mail, the delivery day
will be the seventh day after the registered mail is sent. Any party who
changes its any correspondence address (including registered address,
telegram number, facsimile number) shall inform the other party by prior
written notice.
21.8 The index and heading of this contract is for easy reference only. They do
not affect the content, meaning and explanation of all provisions.
21.9 This contract shall be written in Chinese with eight original copies which
all have the same binding forces. The cooperative two parties each keep two
copies. The remaining copies will be delivered to relevant units for
filing. Duplication copies will be made if necessary. This contract is
signed on 5th August 1996 in Hong Kong by the authorized representatives of
both parties.
Party A :Huizhou Highway Property Party B: Guanghui Highway Project Co. Ltd.
Development Company
Authorized Representative: Authorized Representative:
Seal: Seal:
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Appendix II
SUPERVISION AGREEMENT ON SPECIFIED BANK ACCOUNT
This agreement is signed by three parties hereunder at Huizhou, Guangdon
province on 5th August, 1996:
Party A : Huizhou Highway Property Development Company
Party B : ▇▇▇▇▇ ▇▇▇ Highway Project Company Limited
Party C : Construction Bank of China, Huizhou Branch
WHEREAS Party A and Party B signed the "Regarding the establishment of Guinghui
Highway Development Co. Ltd. Agreement" ("cooperative contract") on 5th August,
1996 and a Sino-foreign cooperative company ("cooperative company") is
established in Huizhou, Guangdon province accordingly;
WHEREAS in accordance with the cooperative contract, the cooperative company
shall allocate the income to party B with first priority;
NOW THEREFORE Party A, Party B and Party C shall herein agree and comply with
the following provisions signed:
1. Party A and Party B agree to open a Specified Bank Account in Party
C's Huizhou Branch under the name of the cooperative company for
saving the toll fees of the toll booths in Tongkeng, Pingling or other
toll booths that may be set up by the cooperative company in the
future. Both Parties A and B guarantee that all toll fees collected
either in RMB or foreign currency will be deposited into the specified
bank account in accordance with the laws and related regulations.
2. In order to ensure that all income from the toll booths shall be
deposited in Party C bank account, Party C agrees to appoint a person
to reach the toll booths at 11:45 a.m. and 6:00 p.m. everyday to check
the collected toll fees on the spot and deposit them into the
specified bank account.
3. The Party or Parties concerned shall cooperate with Party C when Party
C carries out its work at toll booths and shall provide evidence for
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the toll fee(s) that has been written out but has not been deposited
in the bank.
4. Party C shall carry out its work seriously in toll booths in
accordance with the stipulations of the State Exchange, Banking and
Business and shall keep the daily accounting records for reference.
5. Under normal conditions, the deposit in specified bank account shall
only be used to pay for the expenses arising from the implementation
of the cooperative contract, including the management expenses of the
first phase of investment and Jinlong Highway.
6. In case the cooperative company does not comply with the provisions of
the cooperative contract and does not pay for Party B the agreed
minimum return on time, Party C agrees, having received the written
notice from Party B, to supervise the specified bank account
immediately. All the deposit in the specified bank account shall be
used to pay for Party B's agreed minimum return in accordance with the
cooperative contract. Party A agrees that Party B is entitled to
request Party C to supervise the accounts of other road section of
Party A. In case the cooperation company does not generate enough
income to pay for Party B the agreed minimum return mentioned in
Article 12.1 and 12.2 of the contract. Party B is entitled to request
the bank to autopay Party B the agreed minimum return compromised by
Parties A and B from Party A's account of other road section. When the
cooperative company or guarantor (i.e. Party A) has paid the minimum
return to Party B, the cooperative company shall not withdraw any
deposit of the specified bank account until Party B agrees and
provides a written notice to Party C to release the supervision.
7. This agreement shall be effective from the day when it is signed and
shall be expired after the liquidation is completed.
8. This agreement and appendices shall be effective when they are signed
by the three parties. The agreement has three original copies. Each
party shall keep one of these copies.
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Party A: Huizhou Highway Property Development Company Limited.
Authorized Representative:
Chop:
Party B: ▇▇▇▇▇ ▇▇▇ Highway Project Company Limited
Authorized Representative:
Chop:
Party C: Construction Bank of China, Huizhou Branch
Authorized Representative:
Chop:
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