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EXHIBIT 10.3
SINO-FOREIGN COOPERATION CONTRACT
SHENZHEN ▇▇▇ ▇▇▇▇ PRINTING PRODUCT CO. LTD.
1. GENERAL PRINCIPLES
People's Republic of China, Shenzhen City, ▇▇▇▇ District, Xixian Town
Goshu Economic Development Company and Hong Kong ▇▇▇ ▇▇▇▇ Printing
Group Company Limited, according to the PRC Sino-Foreign Joint Venture
Enterprise Law and other laws, regulations of China and relevant rules
and regulations of Shenzhen Special Zone, based on the principles of
equity and upon friendly negotiations, agree to enter into this
Contract for conducting a sino-foreign cooperation company in the
People's Republic of China, Guangdong Province, Shenzhen Economic
Special Zone.
2. THE PARTIES
(1) PARTIES TO THIS CONTRACT:
(PRC) Shenzhen City, ▇▇▇▇ District, Xixian Town Goshu
Economic Development Company ("Party A"), registered in
Shenzhen China having its registered address at Shenzhen
City Xixian Town Goshu.
Legal Representative: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Position: General Manager
Nationality: Chinese
(Hong Kong) ▇▇▇ ▇▇▇▇ Printing Holdings Company Limited
("Party B"), registered in Hong Kong having its registered
address at ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, 603-609 Castle Peak Road, Tsuen Wan, New
Territories, Hong Kong.
Legal Representative: Wu ▇▇▇ ▇▇▇
Position: Director
Nationality: Australian
3. INCORPORATION OF COOPERATION COMPANY
(2) Both Parties A & B agree to incorporate a sino-foreign
cooperation enterprise (the "Cooperation Company"):
Name of the sino-foreign cooperation enterprise to be
incorporated by both Parties A and B:
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Shenzhen ▇▇▇ ▇▇▇▇ Printing Product Company Limited
Registered address of the Cooperation Company; Shenzhen
City, ▇▇▇▇ District, Xixian Town Goshu Economic Development
Company Limited.
(3) The incorporation of the Cooperation Company is approved by
the government of China and it has the qualifications of a
PRC legal person. All of its activities must comply with the
laws and regulations of the PRC, and the legal rights and
responsibilities of the Cooperation Company are protected by
Chinese law.
(4) The Cooperation Company is a limited liability company. The
parties to the Contract agree to the conditions of the
incorporation of the Cooperation Company, the distribution
of profits, the share of risks and losses, the manner
of management and business and the distribution of the
assets at the time of termination of the Cooperation
Company.
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 a value of twenty million per year.
5. TOTAL INVESTMENT, AUTHORIZED CAPITAL AND CONDITIONS OF COOPERATION
COMPANY:
(7) Total investment of the Cooperation Company; RMB20,000,000;
Authorized capital; RMB20,000,000;
(8) The parties shall provide the following to Cooperation
Company: Party A: provision of the factories, dormitories
and warehouses as stated in Schedule 1, Total area is
23031.94 sqm (the "Estate").
Party B; injection of RMB20,000,000 as registered capital in
the following format as its contribution of capital:
Cash: 4,000,000
Machinery: 16,000,000 (as confirmed by the examination
conducted by the China Commercial Examination Department).
Party B shall inject the capital in foreign exchange
according to the mid-price of the RMB and foreign
exchange issued by the Bank of China on the payment day.
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(9) Installment or supply of the capital and conditions
of the Cooperation Company. First stage: Party A injects the
Estate, Party B injects 50% of the cash and facilities
within 3 months after the issue of the business license of
the Cooperation Company.
Second stage: Party B: 50% of cash and facilities within one
year after the issue of the business license of the
Cooperation Company,
Within 30 days of the injection of capital and the
fulfillment of the conditions of Cooperation Company by both
parties, the facts shall be examined and certified by
accountants registered in China and an examination report
shall be issued. A certification of the contribution of
capital shall be issued by the Cooperation Company according
thereto (or upon production of evidence 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, it only becomes
effective once the capital has been totally contributed or
the conditions of the Cooperation Company have been
fulfilled, and also it is resolved by the board of
directors, and within one month after approval by the
original approving department, and the procedures of the
change has been dealt with in the Industrial and Commercial
Administration Management Department. No party of the
Cooperation Company can pledge whole or part of its rights
or responsibilities to a third party without the approval of
the other party to the Cooperation Company.
Unless it is agreed in writing by the other party, a party
can only transfer its whole or part of its rights or
responsibilities of the Cooperation Company to the other
party to the Cooperation Company.
Transfers will be ineffective if it is in breach of the
above stipulations.,
6. PARTIES OF COOPERATION COMPANY AND THEIR RESPONSIBILITIES
(11) The parties of the Cooperation Company shall comply with
the following matters for itself:
Responsibilities of Party A: Responsible for dealing with
the land use rights, realty and estate license of the
Estate, and responsible for dealing with the relevant
procedures legally and responsible for paying all expenses;
Dealing with the matters of application for the
incorporation of the Cooperation Company;
Registration : dealing with the procedures of the Estate and
building facilities;
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organizing design, constructions of the Estate and its other
constructions and facilities;
According to the stipulations of Clause 8, supply the
referred to matters to the Cooperation Company;
Assisting in dealing with the importation custom procedures
of the machinery, facilities and raw materials for the
production of the Cooperation Company;
Assisting in buying or renting facilities, raw materials,
office facilities, transportation, communication facilities
of the Cooperation Company in China;
Responsible for the expenses and taxation of the renovation,
management fee, estate duty, land use tax etc. of the
Estate;
Assisting in confirmation of the conditions of the water
supply, electricity supply, transportation, etc.;
Assisting in the recruitment of management offices,
technicians, workers and other staff of the Cooperation
Company;
Assisting in dealing with the relevant procedures of the
foreign staff working in the Special Zone; responsible in
dealing with other matters entrusted by the Cooperation
Company.
Responsibility of Party B:
According to the stipulation of Clause 8, the referred to
matters to the Cooperation Company:
Assisting in dealing with the relevant matters of purchasing
machinery and facilities, raw materials etc. in the
international market for the Cooperation Company;
Assisting in the recruitment of technicians and examination
staff for installment of facilities, testing and production
of the Cooperation Company;
Assisting in training of the technicians and workers of
Cooperation Company;
Responsible for stabilizing processing products up to
quality within the period fixed according to the ability
of design,
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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 in National market; the price of such 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 according to the laws of China for the
examinations of import and export as stipulated, shall be
produced for examination by the China Commercial Products
Examination Department.
(14) The original raw materials can be purchased in or outside
China by the Cooperation Company, the price of such has to
be approved by the board of directors.
8. SALES OF THE PRODUCT
(15) Ratio of sales of the products of the Cooperation Company is
as follows:
Export Sale: 85%,
Local Sale : 15%.
(16) Export sale of the Cooperation Company shall be the
responsibility of Party B, local sale shall be the
responsibility of Party A.
(17) Sales prices of the Cooperation Company shall be fixed by
the board of directors according to the price level both in
and outside China, and be adjusted if necessary.
9. DISTRIBUTION OF PROFITS AND SHARE OF RISKS AND LOSS
(18) The Cooperation Company after paying tax and withdrawing
money for different funds, distribution of profits shall be
made as follows: For the first year, Cooperation Company
pays to Party A a fixed amount of RMR2,76 million from the
issuance of the business license of the Cooperation Company
which shall be paid to Party A in monthly installments every
month in advance. Party B guarantees the Cooperation Company
will pay to Party A on time. From second year, it is to be
increased 5% every year, If the Cooperation Company suffers
a loss or the profits for distribution are not sufficient,
then Party B shall be responsible to pay the full amount.
After Party A receives its distribution every year from the
Cooperation Company, the balance shall belong to Party B.
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(19) With respect to the profits to be distributed to the foreign
party of the Cooperation Company after performing the
responsibilities as stipulated under the law and Contract
and the capital to be distributed at the termination of the
Cooperation Company, the money can be remitted outside China
according to the law.
The salaries and other legal incomes of the foreign staff of
the Cooperation Company, after paying the personal tax
according to the law, can be remitted outside China.
(20) Losses of the Cooperation Company shall be the
responsibility of Party B itself.
10. BOARD OF DIRECTORS AND THE ORGANIZATION OF THE MANAGEMENT OF BUSINESS,
(21) The Cooperation Company has a board of directors. The date
of the issuance of the business license of the Cooperation
Company is the formation data of the board of directors.
(22) The board of directors consists of five directors, Party A
appoints one director; Party B appoints four directors;
Chairman of the board of directors is appointed by Party B.
The vice chairman is appointed by Party A. Term of the
directors and chairman is four years. Their appointment can
be extended by further appointment by the Party who
appoints them.
(23) The board of directors is the highest authority organization
of the Cooperation Company. It decides all the important
matters of the Cooperation Company. The important matters
are stated in Schedule 2 which can only be finalized after
they have been approved by the board of directors
unanimously. For other matters, they shall only be effective
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, he can authorize the vice chairman or
other directors as his representative.
(25) Meetings of the board of directors should be at least once a
year, the meeting 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 directors who
attend as confirmation and kept in files.
(26) The quorum of the meeting of board of directors shall be
two-third of the directors. If a director cannot attend the
meeting, he can appoint a person
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under a power of attorney to represent him to vote. If the
director cannot attend a meeting of the board of directors,
but does not appoint a proxy, he shall be deemed to have
waived his rights.
(27) Meetings of board of directors shall normally be held at
the registered address of the Cooperation Company,
(28) A director shall be responsible for the economic
consequences and the corresponding legal consequences for
his own graft or the dereliction of duty which result in an
economic loss to the Cooperation Company.
(29) The Cooperation Company shall establish a business
management department at its registered address which is
responsible for the daily work of the Cooperation Company.
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 can also be the general manager or the
deputy general managers. The general manager is 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 cannot be the general manager or deputy managers
of other economic organizations. They cannot join other
economic organizations which are the competitors of the
Cooperation Company.
(31) The deputy manager shall assist the general manager. When
the general manager deals with important questions, he
shall discuss with the deputy general managers. When they
cannot agree, it shall be decided by the chairman of the
board of directors.
(32) If any general manager, deputy managers and other senior
management staff is in dereliction of his duty, after being
so resolved by the board of directors, his employment
Contract can be terminated, If there is economic loss to
the Cooperation Company, they shall be responsible for the
economic loss in accordance with his legal
responsibilities. If the general manager, deputy managers
and other senior staff resign from their position, their
resignations shall be submitted 60 days in advance to the
board of directors in writing.
(33) The recruitment, termination, remuneration, benefits,
protection of labor, insurance of labor, reward and
punishment shall be formulated through the board of
directors of the Cooperation Company according to the
relevant law, regulations of PRC, Shenzhen Economic Zone.
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(34) Recruitment and salaries, social insurance, welfare,
expenses of business trips of senior management staff of the
Cooperation Company shall be discussed and decided by the
board of directors.
11. TAXATION, AUDIT, FINANCIAL BUSINESS, STATISTICS AND ENVIRONMENTAL
ISSUES
(35) According to the relevant PRC laws the Cooperation Company
shall pay appropriate taxation.
(36) According to relevant PRC law and regulations of taxation
the staff and the workers of the Cooperation Company shall
pay personal tax.
(37) According to relevant PRC law the Cooperation Company shall
withdraw reserved funds, funds of development of the
Cooperation Company, welfare of the staff and workers
incentive funds, the ratio of the withdrawal of each year
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
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 department; either party has the
right to employ its accountant at its own expense for the
examination of the Cooperation Company's accounting books.
(39) The Cooperation Company shall open a foreign exchange
account at a national bank foreign exchange organization
which permits the business of foreign exchange. Matters of
foreign exchange of the Cooperation Company shall be dealt
with according to the relevant foreign exchange management
regulations of China.
(40) The Cooperation Company can obtain loans from financial
organizations in or outside China. The conditions of the
loans and their guarantee shall be borne by the party who
borrows the loans.
(41) According to the relevant regulations of China, the
Cooperation Company shall report to the relevant departments
its monthly, seasonal, annual accounting reports and
statistics reports.
(42) According to PRC environmental protection law the
Cooperation Company shall be responsible for the duties of
the protection of environment, and to undertake the
prevention steps of the pollution of the environment.
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12. INSURANCE
(43) The different types of insurance of the Cooperation Company
shall be purchased at the insurance organizations within
China. The types of the insurance, the purchase of the
insurance, their duration etc. shall be decided by the board
of directors of the Cooperation Company according to the
relevant stipulations of China.
13. CHANGE AND TERMINATION OF CONTRACT
(44) Within the duration of the Cooperation Company, the parties
shall negotiate and agree to the important changes to the
contract of the Cooperation Company which shall be signed by
both parties in writing, and reported to the original
approval organization for its approval, and shall become
effective after the procedures of registration have been
dealt with through the Industrial and Commercial
Administration and Management Department.
(45) If the Contract of the Cooperation Company cannot be
performed because of force majeure or continuing loss or
insufficiency of business of the Cooperation Company, after
it has been resolved unanimously by the board of directors
and has reported to the original approval organization for
its approval, the Contract of the Cooperation Company can be
terminated ahead of the expiry date of the Contract, and it
shall be reported to the Industrial and Commercial
Administration Management Department for the cancellation of
the Cooperation Company.
(46) If either party of the Cooperation Company becomes bankrupt
or is wound up, then after it has been resolved unanimously
by the board of directors of the Cooperation Company, it
shall be reported to the original approval organization for
its approval. The Cooperation Company Contract can be
terminated ahead of the expiry date of the Contract.
(47) In the event of earthquake, typhoon, flood, fire, war and
other unforeseen circumstances and other force majeure which
cannot be prevented or avoided as to its occurrence and its
consequences which directly affect the performance of this
Contract or the terms hereof cannot be performed on time,
the party who encounters the above force majeure shall
immediately notify the other party by telex, and shall
within 15 days produce the full information relating to the
force majeure upon which the Contract of the Cooperation
Company cannot be performed and the valid documents
certifying the necessary delay of the 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 events,
both parties shall negotiate and decide whether to
terminate the Contract, or to exempt part of the
responsibilities of the Contract or to extend the time
of performance thereof.
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(48) Where one party does not perform its responsibilities as
stipulated under the Contract of the Cooperation Company, or
is seriously in breach of the terms of the Contract of the
Cooperation Company which results in the inability of the
business of the Cooperation Company or it is not possible
for the Cooperation Company to achieve its business aim,
that party shall be deemed in breach of the Contract. The
affected party shall have the right to ask for compensation
from the party in breach, and shall have the right to report
to the approval organization for its approval of the
termination of this Contract ahead of the expiry date of the
Contract.
14. RESPONSIBILITIES OF IN BREACH OF CONTRACT
(49) Where one party does not according to Part 5 of this
Contract perform the responsibilities of paying its
investment contributions or supply the referred to matters
to the Cooperation Company on time, from the date of
any such defaults, the party in breach shall pay an amount
equivalent to 0.5% of the authorized capital to the other
party each month. If it is still not performed after six
months, apart from the accumulated amount of 3%. The other
party has the right to 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
party in breach to compensate for its economic loss.
(50) In the event of any default of one party which has the
result that this Contract cannot be performed or cannot be
performed in full, such breach shall be the responsibility
of the party in default. If it is a default by both parties,
the parties shall be responsible for the breach individually
according to the actual situation.
15. TRADE UNION
(51) The Cooperation Company shall establish a trade union
according to the law for the development of a trade union
for the protection of the legal rights of the staff and the
workers.
The Cooperation Company shall supply to the trade union the
essential terms 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 license of the
Cooperation Company.
When it is agreed by both parties and is resolved
unanimously by the board of directors of the Cooperation
Company, the Contract can be
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extended by applying to the original approval organization
six months before its expiration.
17. HANDLING OF THE ASSETS
(53) When the Contract is expired or it is terminated ahead of
the expiry date of the Contract, the Cooperation Company
shall liquidate the assets, creditors' rights, and
creditors' responsibilities according to legal procedures.
(54) At the time of the expiration of the Contract or the
termination of the Contract ahead of schedule, the assets,
the creditors' rights and liabilities of the Cooperation
Company shall belong to and be shared according to the
following formats:
The Estate still belongs to Party A. Party B shall be
responsible for the creditors' rights, liabilities of the
Cooperation Company within the scope of contribution of its
authorized capital. After it is fully repaid, other assets
(including machinery and facilities) shall belong to Party
B. Party A shall not be responsible for any creditors' right
or liabilities of the Cooperation Company.
18. EQUITABLE LAW
(55) This Contract is protected by PRC law.
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 and resolution. The
arbitral award is final and binding on both parties and
shall be performed by each party according to the award. The
arbitration fee shall be borne by the losing party.
(57) During the process of arbitration, this Contract shall
continue to perform apart from that part in dispute and
being arbitrated.
20. EFFECTIVE OF CONTRACT AND OTHERS
(58) According to the principles of this contract, the attached
documents, hall include:
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Articles of association of the Cooperation Company which
constitutes part of this Contract. If there is any conflict
with the above attached documents to this Contract, this
Contract shall prevail.
(b) This Contract and its attached documents shall be reported
to the approval organizations for its approval and shall
become effective from the date of the approval.
(c) If the parties communicate by telex or facsimile for those
matters relating to the responsibilities and the rights of
one party, they shall be notified to the other party by
post. The legal addresses of the parties set forth in this
Contract shall be their corresponding addresses.
(d) This Contract is signed by the legal representatives of the
parties in Shenzhen PRC on 28th May 1995.
Party A: Legal Representative:
Legal Representative:
Party B: ▇▇▇ ▇▇▇▇ Printing Holdings Co, Ltd.
Legal Representative:
28th May 1995
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SCHEDULE 1
HOUSING/ESTATE USAGE AREA
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No. 6 Baoan County Xixian town Factory 5160.90 sqm
Gushu Village
Zhuao Factory
No. 13 Baoan County Xixian town Factory 1854.44 sqm
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Xixian town Factory 6750.00 sqm
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Xixian town Dormitory 1188.00 sqm
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Xixian town Dormitory 3250.80 sqm
Gushu Village
Dormitory
Baoan County Xixian town Warehouse 4827.80 sqm
Gushu Village
Gaohui Manufacturing factory
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Total area: 23031.94 sqm
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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 authorized capital of the Cooperation
Company;
4. Merger of the Cooperation Company with other economic organizations.
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