AGREEMENT ON ESTABLISHMENT
OF A SINO FOREIGN EQUITY JOINT VENTURE
CHINA-CANADA LIUMAO GRAPHITE PRODUCTS CO. LTD.
September 9, 1997
I hereby certify the within document to be a true and accurate
translation copy of the original Agreement dated September 9,
1997 in Chinese, this 16th day of September, 1997.
//ss ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇
Agreement on the establishment of a joint venture
Based on the Agreement on Intent signed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Mine
of Jixi (hereinafter called "Party A") and ▇▇-▇▇▇▇ Resources,
Inc. (hereinafter called "Party B") in Jixi of Heilongjian on
June 4, 1997, the parties conducted further consultations and
discussions from September 6 to September 9, 1997 on the
establishment of any equity joint venture in relation to the
Liumao Graphite Mine of Jixi, Heilongjiang, China. The parties
have entered into this Agreement based on the following terms and
conditions.
1. The Parties have agreed to establish an equity joint venture
covering the graphite mine in Liumao, Jixi of Heilongjian,
China. The joint venture company shall be a limited
liability company, and shall be registered in Jixi,
Heilongjian of China as a sino-foreign equity joint venture
with independent accounting and legal person status. The
name of the joint venture is temporarily set as "China-
Canada Liumao Graphite Products Co. Ltd.".
2. The scope and size of production and business of joint
venture:
1) high purity graphite, annual output 1,000 tons;
(carbon content 99.9% up to 99.995%)
2) expandable graphite, annual output 5,000 tons;
3) graphite paper, annual output 4,000 tons;
3. Investment in the joint venture:
Investment in the joint venture shall be divided into three
parts:
Part 1. For the 1,000 ton/year high purity graphite project,
the total investment is estimated at RMB33,200,000,
among which 22,200,000 Yan is as fixed assets and
11,000,000 Yan as working capital.
Part 2. For the 5,000 ton/year expandable graphite project,
the total investment is estimated at RMB25,000,000,
among which 20,000,000 Yan is for fixed assets and
5,000,000 Yan for working capital.
Part 3. For the 4,000 ton/year graphite paper project, the
total investment is estimated at RMB20,000,000
(subject to the completion of feasibility study
report and project budgeting). Both parties shall
be allowed to obtain financing for Part 3 in the
name of the joint venture and through coordination.
The total investment amount for each of the three parts mentioned
above shall be subject to a investment amounts determined through
examination of the feasibility study report conducted by both
parties and experts, organized by the government department with
the authority to approve.
1. Investment Scope and Investment Ratio of Parties:
1) Investment Scope:
Party A: power supply, water supply, transportation,
communication and portion of working capital.
Party B: equipment, working capital for constructions
and others.
2) Investment Ratio and Mode:
Party A: responsible for 20% of the investment amounts
in the form of the existing installation,
equipment and materials.
Party B: responsible for 80% of the investment amount
in the form of cash investment.
2. Organization and Management of the Equity Joint Venture:
The joint venture shall form a Board of Directors to be
appointed by both parties and the Board of Directors shall
compose of Chairman, Vice-Chairman and several directors, all
under the laws of PRC governing sino-foreign equity joint
ventures. The Board of Directors shall appoint a General
Manager and a Vice General Manager to be responsible for the
day-to-day work, production and operations of the joint
venture. The management structure of the joint venture shall
be established in accordance with the needs.
3. Supply of Raw Materials to the Joint Venture:
1) Party A shall supply the raw material for high purity
graphite to the joint venture in accordance with the
market price. The quantities of such supply shall be
no less than 1,500 tons per year with carbon content at
90% or above.
2) Party A shall supply raw material for expandable
graphite to the joint venture according to the market
price with an annual supply no less than 5,000 tons.
3) The joint venture shall produce and supply raw
materials for graphite paper.
4. Sale of Products:
1) The joint venture shall sell high purity graphite to
domestic and international market directly.
2) Expandable graphite as raw materials for graphite
paper, shall be settled internally within the joint
venture.
3) The joint venture shall be responsible for the sales of
graphite paper and all graphite paper shall be sold in
the international market.
5. Transfer of Interest:
Either party may transfer the whole or part of its interest
in this Agreement to any third party.
6. Schedule for the Establish of the Joint Venture:
1) Party A and Party B shall each complete a feasibility
study report on high purity graphite and expandable
graphite, and will jointly submit a feasibility study
report based on Party A's report to the government
department for approval and acceptance by the end of
October, 1997. The parties shall complete feasibility
study report on graphite paper by the end of December,
1997. Party B shall supply Party A by the end of
November, 1997 the production program and the market
price in relation to graphite paper.
2) By the end of November, 1997, the parties shall sign
the Agreement to Establish an Equity Joint Venture in
Jixi, Heilongjiang, conduct the first Directors'
meeting and adopt the Articles of Association. Party A
shall, for this purpose, complete the drafting of the
Agreement and Articles of Association to be delivered
to Party B for comments and revisions and then to be
submitted to the Board of Directors.
3) By the end of January, 1998, the joint venture shall
commence the registration procedure of China. At the
same time, the parties shall send people to the country
that will supply the equipment and sign the purchase
agreement for equipment.
4) By the end of March, 1998, the design for the high
purity graphite project shall be completed and the
construction shall commence in April.
5) By the end of April, 1998, the design for expandable
graphite project shall be completed and the
construction shall commence in May.
6) By the end of June, 1998, the design for the graphite
paper project shall have been completed and the
construction shall commence in July.
7. The cost for the approval and acceptance of the project,
completion of the feasibility study report and the review
and examination of the feasibility study report shall be
250,000 Yan. The cost shall be deemed the cost of the joint
venture.
8. The parties agree to continue consultation and discussions
on matter not covered in this Agreement.
9. This Agreement shall expire December 31, 1997.
10. This Agreement shall be submitted to Heilongjiang Provincial
Foreign Investment Administration Bureau for filing.
Party A: ▇▇▇▇ ▇▇▇▇▇▇ Graphite Mine Party B: ▇▇-▇▇▇▇
Resources, Inc.
Representative: ▇▇, ▇▇▇▇ Representative: ▇▇▇▇▇
▇▇▇▇▇▇▇
Dated: September 9, 1997
[Letterhead of Heilongjiang Foreign Investment Administration
Bureau]
Canadian ▇▇-▇▇▇▇ Resources, Inc.
Liumao Graphite Mine, of Jixi, Heilongjiang and ▇▇-▇▇▇▇
Resources, Inc. have reached an Agreement of Intent to establish
an equity joint venture to jointly develop high purity graphite
(annual output 1,000 tons), expandable graphite (annual output
5,000 tons) and graphite papers (annual output 4,000 tons), and
for this purpose, signed a formal agreement on September 9, 1997
in Harbin City. The said Agreement has been formally submitted
to our bureau for filing records.
Heilongjiang Provincial Foreign Investment Administration Bureau.
Date: September 12, 1997 (Seal)
EQUITY JOINT VENTURE AGREEMENT
BETWEEN
LIUMAO GRAPHITE MINE
AND
1NTEGRATED CARBONICS CORP.
NOVEMBER 10, 1997
(General Contract)
CHAPTER 1
PARTIES OF THE COOPERATIVE JOINT VENTURE AGREEMENT
1. The two parties of this Contract and the JVC are:
(1) LIUMAO GRAPHITE MINE
(hereinafter referred to as "Party A"), legally
established and registered in Jixi, Heilongjiang
Province, the People's Republic of China, China.
Address: Jixi, Heilongjiang Province, China
Telephone: (▇▇▇) ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇-▇▇▇▇
Legal Representative: ▇▇▇▇ ▇▇
Title: General Manager
Nationality: Chinese
(2) INTEGRATED CARBONICS CORP.
(hereinafter referred to as "Party B"), of Nevada,
legally established and registered in the State of
Nevada, U.S.A.
Address: Suite 206-A, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Legal Representative: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇: Chairman
Nationality: Canadian
CHAPTER 2
DEFINITIONS
3. Unless otherwise provided in this Contract, the words and
phrases defined in this Contract shall have the same
meanings set forth herein:
"Articles" refers to Articles of Association of the JVC
containing detailed rules on the establishment and operation
of the joint venture company signed by the Parties as amended
from time to time.
"Approval Authority" means the relevant Chinese governmental
organ or organs, or any department to which authority has
been delegated, which, in accordance with the prevailing
Chinese laws, has the power to approve or not to approve this
Contract or other agreements and documents in connection with
this Contract.
"Board of Directors" refers to the Board of Directors of the
Joint Venture Company.
"Business License" means the license issued by the Chinese
government to the Joint Venture Company allowing it to carry
on business and operate in China.
"Contract" means this agreement and all the attachments and
amendments hereof.
"Contract Rights" includes all agreements, contracts, rights
or offerings obtained from third parties including Government
Instrumentality, as well as all other rights including right
or interest derived from any option agreement, leases or
other contracts permitting Parties to carry out any Operating
Activities set out hereunder.
"Costs" means all costs and expenses incurred by the JVC, or
either Parties on behalf of or for the JVC, such as costs of
site uses, samplings, survey and investigations, tests,
environmental studies, engineering designs, construction,
manufacturing and purchase of equipment and machinery,
mineral development and processing, expenses for foreign or
Chinese engineers or other experts, independent engineering,
expenses for technical or professional opinions, salaries,
wages, benefits, administrative and travel expenses.
"General Manager" or "Deputy General Manager" means the
individual or entity appointed pursuant to Chapter 8 herein.
"Government Instrumentality" means any state, provincial,
city, municipal or local government and any department
thereof, or the central bank, court, commission, bureau or
board exercising any regulation, expropriation or taxing
authority under or for the account of any of the foregoing.
"Joint Venture Company" or "JVC" means the cooperative joint
venture company established by the Parties pursuant to
Chapter 4 herein.
"Management Committee" means the committee established
pursuant to Article 31 hereunder.
"Operating Activities" means all operation and business
activities of the JVC, including feasibility studies and
construction of processing plants.
"Parties" means Party A and Party B as well as their
successors and permitted assigns, and "Party" means either
party.
"Phase I", "Phase II" "Phase III"-or "Phases" shall have the
meaning defined in Article 20 hereunder.
"PRC" means the People's Republic of China.
"Products" means graphite products, by-products and other
related products produced by the JVC.
"Province" means the province of Heilongjiang.
"Share Interest" means a Party's percentage of share interest
in the JVC, in the case of Party A, 20% of shares in the
capital of the JVC and, in the case of Party B, 80% of shares
in the capital of the JVC, as adjusted from time to time.
"Subsidiaries" means any individual, partnership, joint
venture, companies or any other business entities controlled
directly or indirectly by a Party.
"Term" means the Term of the JVC as defined in Article 18
herein.
"Total Investment" means the total investment by the Parties
as referred to in Article 19 herein.
"Work Days" means all the days in a year less Saturdays,
Sundays and the Chinese Statutory Holidays.
CHAPTER 3
REPRESENTATIONS AND WARRANTIES
4. Party A hereby represents and warrants as follows:
(1) Party A is legally established and validly existing
under the PRC laws, and as such, has all necessary
legal rights and authority to carry out business in the
Province contemplated in this Contract.
(2) Party A is familiar with the Chinese laws, regulations
and policies relating to foreign investment and joint
venture law.
(3) Party A has obtained or is able to obtain the consent
and/or approval of the Government Instrumentality in
relation to the execution of this Contract and the a
performance of the obligations hereunder.
(4) Party A's signing, interpretation and execution of
this Contract shall not:
(a) be in conflict with the Articles of the JVC or its
scope of business under any license or permit or
approval from the government;
(b) be in conflict with any laws, regulations, rules,
orders or judgments of PRC which Party A must
comply with;
(c) be in conflict with agreements Party A has reached
with any other party.
(5) Party A's operating activities are not in breach of any
environmental laws and regulations of PRC.
(6) Unless otherwise disclosed to Party B, all Party A's
Assets are free from any lien, charge, claim or other
encumbrances.
(7) All licenses, permits and approvals, copies of which
are attached hereto, allowing Party A to carry out its
normal operation, are validly issued and in good
standing.
5. Party B represents and warrants that:
(1) Party B is incorporated under the laws of the Nevada,
U.S.A., and is in good standing and valid existence.
(2) Party B has all the power and authority to execute this
Contract and perform the obligations thereunder and
none of its actions are subject to the consent or the
approval of the government of the Nevada, U.S.A.
(3) This Contract will be effective and binding once
signed by Party B and Party A and approved by the
Approval Authority.
(4) Party B agrees that it shall fully and in good faith
perform each of the obligations set out in this
Contract and shall exercise each of its rights under
this Contract in a reasonable manner.
CHAPTER 4
ESTABLISHMENT OF THE EQUITY JOINT VENTURE COMPANY
6. Name of the JVC,
(1) The Chinese name of the JVC shall be:
Liumao ICC Graphite Products Ltd.
(2) The English name of the JVC shall be:
ICC Liumao Graphite Products Ltd.
7. The Business Address of the JVC:
The business address of the JVC shall be at Jixi,
Heilongjiang, China.
8. Compliance of Laws:
All activities of the JVC shall comply with the laws,
regulations and rules of the PRC, and all its proper business
activities and legal rights shall be protected by the PRC
Laws.
9. Establishment of the JVC:
Party A and Party B hereby agree that they shall cause an
Equity Joint Venture to be established upon signing of this
Contract on the basis of the Articles and pursuant to the Law
of the People's Republic of China on China Foreign Equity
Joint Ventures, the Detailed Implementing Regulations for the
Law of the PRC on Equity Joint Ventures and the provisions of
other applicable PRC laws and regulations.
10. Responsibility of the Company:
The JVC shall be responsible for its own debts and assets.
Either Party shall only be liable to the extent of its
investment in the JVC and the JVC shall be liable to any
third party only to the extent of its registered capital.
11. Profits:
The net after tax profits or dividends of the JVC shall be
distributed pro rata to the Share Interest of the Parties.
CHAPTER 5
PURPOSE, BUSINESS SCOPE AND TERM OF COOPERATIONS
12. Purpose and Mandate:
The purpose of the JVC shall be to enhance economic
cooperation and technical exchange, to use advanced
technology and scientific management methods, and to
endeavour to produce high quality graphite products to the
international market in compliance with the ISO-9002 standard
and in accordance with the schedule set by the Board of
Directors, so as to permit the Parties to achieve
satisfactory economic benefits and investment returns, all on
the basis, of the principles of fairness, legality, quality
and mutual benefit.
13. Business Scope:
The business of the JVC shall be production, processing and
export of graphite products, including high purity graphite,
expandable graphite, graphite sheet or other graphite
products as may be determined by the JVC.
14. No Competition:
Neither Party shall conduct or contemplate any competitive
business activities in the Province. Unless otherwise agreed
between the Parties neither Party shall be engaged in any
business or enter into any discussions with or establish any
other joint venture, partnership, company or other form of
business which would be in direct or indirect competition
with the JVC or its products, or would in any way diminish,
restrict or affect the supply of raw material or materials
from any existing or future production facilities or source
of supply to the JVC.
15. First Right of Refusal:
Party A hereby grants to Party B a First Right of Refusal for
▇▇▇ ▇'s investment or participation in any future graphite
projects to be undertaken by Party A or any of its
Subsidiaries individually or jointly with any other parties
in the Province, and Party A shall inform Party B in writing
of its plan of any future graphite projects as soon as such
plan is formulated.
16. Option to Acquire
Party A hereby grants Party B a priority option, exercisable
during the Term of this Contract, to acquire the whole or
part of Party A's existing or future production facilities
and/or mineral deposits. The Option may be exercised by
Party B delivering to Party B the Notice to exercise
substantially in the form attached hereto as Schedule "A",
upon occurrence of any one of the following events:
(1) Party A in voluntary or involuntary bankrupt or
liquidation proceedings; or
(2) any material change in Party A's corporate structure or
ownership; or
(3) any adverse material change in the financial situation
of Party A; or
(4) any unremedied shortfall of raw material supplies to
the JVC by Party A over 1 month; or
(5) at any time, when in the view of Party B, it is in the
best interest of the JVC to do so.
17. Option to Expand:
Party A hereby grants to Party B the exclusive right to
construct and operate independent mining operations and
floatation circuits ("Expansion") using Party A's existing
plant or other site, as may be required from time to time, to
secure or increase production of raw materials to be supplied
to the JVC. Such Expansion may take the form of joint
venture between Party A and Party B or an operation wholly
owned and operated by Party B. Where such Expansion takes the
form of a joint venture, the terms and conditions of this
Contract shall apply where applicable.
18. Technology Transfer:
Both Parties shall be responsible to recommend and obtain
advanced technology and process to optimize the efficiency of
production and operation of each Phase and maximize return on
investment. Any transfer of technology to the JVC shall
strictly adhere to the terms and conditions imposed by the
transferor and the policies and guidelines of the JVC for the
protection of the said technology.
19. Term of the JVC:
The Term of the JVC shall be 30 years commencing on the date
of the issuance of Business License of the JVC, and may be
extended by such length of time as shall be decided by the
Board of Directors and approved by relevant authorities.
CHAPTER 6
TOTAL INVESTMENT, REGISTERED CAPITAL AND TRANSFER
20. Total Investment and Registered Capital:
The Total Investment of the JVC shall be the gross amount of
all the funds required to complete the three Phases of
operation during the Term of this Contract and the minimum
Total Investment shall be the funds required to complete any
one Phase of the operation but shall not in any case exceed
US Dollars 28 million unless decided otherwise by the Parties
pursuant to Article 24 hereunder. The registered capital
shall be 40% of the Total Investment or the minimum Total
Investment, and shall be paid in stages to the JVC as
required by the operation of the JVC pursuant to Phased
Development provided for below.
21. Phased Development:
The operation of the JVC shall be divided into three Phases:
Phase 1: implementation and the completion of the 1,000
tons/year high purity graphite project with a
total investment estimated at USD4,150,000 (RMB
33,200,000 at exchange rate 1:8);
Phase 2: implementation and the completion of the 5,000
tons/year expandable graphite project with a total
investment estimated at USD3,120,000 upon
completion of the feasibility study and
recommendation thereof (RMB 25,000,000 at exchange
rate 1:8);
Phase 3: implementation and the completion of the 4,000
tons/year graphite sheet project with a total
investment estimated at USD20,000,000 upon
completion of the feasibility study and
recommendation thereof (RMB 160,000,000 at
exchange rate 1:8).
Each Phase shall be an independent operation under its own
schedule to be determined by the Board of Directors and with
independent internal accounting. The Board of Directors may
make decisions on the commencement, continuation, postponement
or suspension of, as well as any third party participation in
any Phase.
22. Parties' Obligations:
(1) Party A shall:
(a) obtain and maintain Business License and all
operation licenses for the operation of the JVC
and to assist the JVC in its consultation and
negotiation with government instrumentality to
ensure that the JVC will be able to carry out
operations contemplated hereunder in accordance
with relevant rules and regulations of the
Province and PRC and that Party B's rights and
interests are protected:
(b) obtain secure and maintain for the benefit of the
JVC licenses and permits necessary for the
operation of each and every Phases and the JVC;
(c) provide or cause to be provided, or lease or cause
to be leased, to the JVC Premises for operations
and office uses, and complete the leasehold
improvement of the Premises where necessary, all
at reasonable and competitive price;
(d) assist the JVC in securing all infrastructure and
the services such as supply of water, power, roads
and communication facilities;
(e) provide 20% of the Total Investment in the form of
existing facilities, equipment, Premises,
materials and raw materials and/or cash, as
required by the operation of the Phases;
(f) secure the supply of raw materials, at reasonable
price and in required quantity, quality and grade;
(g) obtain and maintain valid export and other
necessary licenses and permits for the benefit of
the JVC and allow the JVC to use its existing
export facilities at nominal cost to the JVC; and
(h) assist the JVC in the purchase and importation of
equipment, machinery, technology, vehicles or
other supplies which have to be imported;
(2) Party B shall:
(a) assist the JVC in the purchase and importation of
equipment, machinery, technology, vehicles or
other supplies which have to be imported;
(b) assist the JVC in the recruitment of foreign
experts, advisors or agents;
(c) provide 80% of the Total Investment as required by
the operation of the Phases, and
(d) obtain financing if so needed by the JVC.
23. Confirmation of Investment:
Each time when a Party has made its investment to the capital
of the J-VC, an accountant registered in China and appointed
by the Board of Directors shall verify the contribution and
issue a contribution verification report within 60 days after
the receipt of the contribution. Within 30 days after the
receipt of the verification report, the JVC shall issue an
investment certificate in accordance with regulations
governing joint venture enterprises. The investment
certificate shall be signed by the Chairman and the Vice
Chairman of the Board of Directors.
24. Valuation of Contribution:
Where a Party makes a contribution not in the form of cash,
such contribution may be valuated and assessed by the
relevant authority pursuant to the practice of PRC. Where a
Party disputes the value of the contribution by another Party
assessed hereunder, the Party shall be allowed to apply for
re-assessment pursuant to the practice of PRC or as agreed by
the Parties. Where a Party disputes the result of the re-
assessment, the dispute shall be referred to the arbitration
procedure provided for herein. The decision of arbitration
shall be final and binding on the Parties.
25. Adjustment of Capital:
Any increase or reduction in the Registered Capital or the
total investment in the JVC must have both Parties' written
agreement, the unanimous endorsement of the Board of
Directors and approval of the Approval Authority.
26. Transfer and Assignment of Share Interest:
Either Party (the "Transferring Party") may transfer, assign
or sell all or part of its Share Interest in the JVC to a
third party or third parties. Such transfer, assignment or
sale of the Share Interest in the JVC will require the
consent of the other Party and approval by the relevant
authorities. Each Party warrants that such transfer,
assignment or sale of Share Interest in the JVC will not
affect the Share Interest of the other Party. The
Transferring Party shall be responsible to ensure the
financial and technical ability of the third party.
CHAPTER 7
BOARD OF DIRECTORS
27. Appointment of Directors:
The Board of Directors shall be formed on the date this
Contract is signed by both Parties to the JVC. The Board of
Directors shall comprise seven (7) members, of which Party A
shall appoint two and Party B shall appoint five. Each
director shall serve a term of three years, which term can be
extended upon expiry by the written confirmation of the
Appointing Party. Either Party can by written notice to the
JVC, dismiss a director it has appointed. Should any vacancy
arise as a result of retirement, dismissal, resignation,
sickness, disability or death, the Appointment Party shall
appoint a new director for the remainder of the term arising
from the vacancy.
The JVC shall indemnify and save harmless the directors
against all liabilities that may arise by reason of the
directors acting as directors of the JVC or any act or
omission of the directors.
28. Chairman and Vice-Chairman of the Board:
The Chairman of the Board of Directors shall be appointed by
Party B and there shall be one Vice-Chairman which shall be
appointed by Party A. The Chairman of the Board is the legal
representative of the JVC and shall only conduct his or her
work within the terms of reference authorized by the Board of
Directors. When the Chairman is unable to perform the
obligations, the Board will appoint the Vice-Chairman or any
director as the legal representative of the JVC.
29. Resolutions of the Board:
The Board of Directors shall be the JVC's supreme authority.
The quorum of the Board meeting shall be 4 directors.
Resolutions of the Board on general matters including the
operation of the JVC, may be adopted by simple majority.
However, the following action can be taken only with the
unanimous resolutions of the directors who attend a Board of
Directors' meeting:
(1) amendment of the JVC's Articles.
(2) merger, division or of the JVC or any material change
in the organization of the JVC.
(3) increase or decrease of the number of shares issued for
the purpose of financing by the JVC, application for
loans, and the increase and transfer of registered
capital.
(4) liquidation or dissolution of the JVC.
(5) mortgage of the JVC's assets.
30. Meetings of the Board:
(1) The Board of Directors shall meet at least once a year.
However, if two-thirds or more of directors so request,
an interim meeting of the Board of Directors may be
convened. Meetings of the Board of Directors shall be
convened and chaired by the Chairman, and in the
absence of the Chairman, by the Vice-Chairman. The
Chairman shall give written notice of the Board of
Directors meeting to each director at least 30 days
before the date of the meeting. The notice shall set
out the agenda, time and place of the meeting. Any
director unable to attend a Board of Directors meeting
for any reason, may by written notice appoint a proxy
to attend the meeting. If a director does not attend a
meeting and does not appoint a proxy, he shall be
deemed to have waived his rights to the meeting. If
the Chairman and Vice-Chairman agree, other persons
including experts may be invited to attend a Board of
Directors meeting as observer, but such observers shall
have no right to vote. The JVC shall be responsible
for the travel expenses and per them of the Directors.
(2) The detailed minutes of each meeting of the Board of
Directors shall be signed by the Chairman and Vice-
Chairman of the Board of Directors and then circulated
to every director. The minutes and resolutions shall
be written in both Chinese and English and shall be
kept in the JVC's records once signed by directors who
have attended the meeting.
31. The Board of Director's authority:
The Board of Director's authority shall include, but not be
limited to the approval of capital expenditures plan
submitted by the Management Commitment, review and approval
of feasibility studies and all costs in relation thereto.
CHAPTER 8
MANAGEMENT STRUCTURE
32. Management:
(1) The JVC shall establish a Management Committee to be
responsible for the day-to-day operation and management
of the JVC. The Management Committee shall be composed
of 5 members including the General Manager and the
Deputy General Manager. Two members including the
General Manager shall be nominated by Party A and three
members including the Deputy General Manager shall be
nominated by Party B, each for a term of three years.
The term of engagement may be extended by the Board of
Directors. The Board of Directors shall oversee the
performance of the General Manager and Deputy General
Manager and other members of the Committee who shall
take charge of the management of the JVC's day-to-day
business and operations in accordance with this
Contract and the resolutions of the Board of Directors
and, through such departments as production,
technology, sales, finance, administration, shall
organize and lead the implementation of the
development, production, sales, processing of the JVC.
(2) All major decisions on the day-to-day operations of the
JVC shall be effective only with the signature of both
the General Manager and Deputy General Manager. The
Board of Directors shall decide on what matters require
the signature of both the General Manager and Deputy
General Manager.
33. Work Standards:
The General Manager and the Deputy General Manager shall
perform to the highest industry standards and efficiency, and
shall observe mining and other relevant industry practice,
and observe the laws of PRC. Where the General Manager or
the Deputy General Manager are grossly negligent or engaged
in malpractice, they may be dismissed and replaced by
resolutions of the Board of Directors meetings.
34. Quality Control:
The Management Committee shall be responsible for formulating
and implementing quality control procedures and regulations
as necessary to ensure the quality and marketability of the
products in international markets. Where it is determined
that, based on the recommendations in the independent
feasibility/marketing study conducted by the JVC, it is
necessary to involve a third party to conduct and ensure
quality control and the marketability of the products, the
Board of Directors shall review and approve the form of such
third party involvement and shall decide upon the terms of
engagement of such third party, including financial
compensation and/or equity offered to such third party.
CHAPTER 9
FINANCIAL ACCOUNTING
35. Monthly Financial Report:
The JVC shall maintain its accounting system in accordance
with international accounting practice. The General Manager
shall provide to each Party a financial report on or before
the 20th day of a calendar month to reflect the balance of
the JVC in the previous month. The General Manager shall
provide a financial report for the previous year on or before
January 31 every year. The JVC's accounting year commences
January 1 and ends December 31 every calendar year.
36. Currency:
The JVC shall use both United States Dollars and Renminbi as
its reporting currency for bookkeeping.
37. Language for Accounting:
All JVC's vouchers and accounting books shall, where it is
economical and feasible, be kept in both English and Chinese.
The JVC's annual financial statements shall be written in
both English and Chinese and one copy of annual financial
statement shall be prepared for the benefit of the JVC in
accordance with Generally Accepted Accounting Principle
(GAAP).
38. Foreign Exchange Balance:
The JVC shall establish foreign exchange and Renminbi bank,
accounts at banks to be chosen by the Board of Directors.
The JVC shall, in accordance with the laws and requirements
of PRC, apply for and maintain foreign exchange certificates.
The JVC will obtain sufficient foreign exchange to meet its
needs. All expenses incurred in currency conversion will be
deemed as the JVC's operational expenses.
39. Products Sales:
The JVC shall sell its Products pursuant to the laws and
regulations of PRC and through its marketing agency or as may
be determined by the Board of Directors.
40. Products Price:
The price of the JVC's Products shall be determined by the
General Manager and Deputy General Manager and approved by
the Board of Directors in accordance with the laws and
regulations of PRC and the price guidelines formulated by the
Board of Directors.
CHAPTER 10
TAX AND AUDIT
41. Taxes Payable:
The JVC shall pay taxes in accordance with the applicable
laws and regulations of PRC, and shall enjoy the preferential
treatment it is entitled to under the Income Tax Law for
Foreign Investment Enterprises and other applicable laws and
regulations of the province and of PRC. Party A shall, in
this respect, provide its utmost assistance.
42. Profits Distribution:
Profits shall be distributed to the Parties according to the
following principle:
(1) the Board of Directors shall, within four months of the
end of a financial year, and after deductions are made
for common reserve, workers' compensation and pension,
decide on the amount of retained earnings and the pro
rata distribution of dividend.
(2) any gross revenue generated annually in each Phase of
operation shall first be used for payment of taxes,
fees and charges in accordance with the provisions of
applicable tax laws and regulations of PRC, and then
applied for the recovery of costs in that Phase. The
remainder shall be the profit to be allocated between
Party A and Party B in accordance with their Share
Interest.
(3) Party B shall enjoy priority in receiving foreign
exchange payment in any profit of the JVC. Foreign
exchange will be U.S. Dollars converted from Renminbi,
with the conversion rate being the average sell and buy
rate at the People's Bank of China of the date when the
Board of Directors decides to distribute profits. If
the JVC does not have sufficient foreign exchange to
advance to Party B, the JVC shall, as instructed by
Party B, convert the Renminbi profit payable to Party B
at the bank at the average exchange rate for foreign
exchanges, and pay such converted foreign exchange to
Party B. If the JVC is unable to make such conversion,
then it shall, as instructed by Party B, deposit an
equivalent amount in Renminbi in an independent savings
account opened in the name of the JVC for the benefit
of Party B. The JVC or Party A shall not use the
principal or interest thereon in this account. If
Party B's instructions and requirements comply with the
laws of PRC, the JVC should immediately perform the
instructions of Party B to deposit Party B's profits
into the bank account.
43. Inspection and Auditing:
The auditing of the accounts of the JVC shall be conducted
through accounting firms registered in China carried in a
timely fashion to meet the regulatory requirement.
CHAPTER 11
INSURANCE
44. Board to Decide:
The JVC shall take out insurance from the Chinese People's
Insurance Company or such other insurance company registered
in the PRC in instance where the Chinese People's Insurance
Company cannot provide adequate coverage or the necessary
form of insurance.
45. Insurance Plan:
The Board of Directors shall decide on the items to be
included in the insurance plan of the JVC.
46. As Operating Costs:
All insurance expenses shall be recorded as operating costs.
CHAPTER 12
LABOUR MANAGEMENT
47. Labour Policy:
All decisions on retirement, employment, termination,
resignation as well as employee benefits shall be made on the
basis of the Labour Law, Labour Management Regulations for
Foreign Invested Enterprises and other applicable laws of PRC
(hereinafter collectively the "Labour Law"). The JVC's
regulations on labour management shall be approved by the
Board of Directors and implemented by the General Manager.
48. Employment Contract:
The JVC shall enter into employment contract individually
with employees. The JVC shall employ management personnel
based on the requirement and the standard set by the Board of
Directors.
49. Hiring:
The JVC shall employ people based on their skills, character
and work experience. The General Manager and Deputy General
Manager shall make decisions as to the number and level of
employees to be hired based on the needs of the JVC. All
employees are subject to a twelve (12) month probation (the
"Probation") before they are formally employed by the JVC.
The Management Committee may, at its discretion, shorten or
extend the Probation.
50. Labour Union:
The employees of the JVC who have completed the Probation may
propose to the JVC to organize a labour union in consultation
with the Board of Directors and pursuant to the Labour Law
and Labour Union Law.
CHAPTER 13
CONFIDENTIALITY
51. General Provisions:
This Contract and all related documents, materials,
technical, geological and financial data and reports shall be
kept strictly confidential. Except otherwise provided for in
this Contract, no content of the aforementioned documents
shall be disclosed to a third party or the public without the
prior written consent of the other Party, which consent shall
not be unreasonably withheld.
52. Term of Confidentiality:
The term of confidentiality shall end three (3) years after
the termination of this Contract. If a Party has transferred
all its interests, then that Party will be bound by the
confidentiality provisions for two years after the transfer.
53. Exceptions:
The JVC may, as decided by the Board of the Directors,
furnish necessary documents, information, data and ret)orts
to a third party or affiliates. Such third party and
affiliate may include:
(1) banks or other credit institutions from which financing
is sought by either Party to this Contract for the
implementation of this Contract.
(2) a potential assignee or assignees to whom rights and/or
obligations under this Contract may be assigned.
However, the assigning party shall ensure the credit
worthiness of the assignee.
(3) professionals such as lawyers and accountants from whom
either Party wishes to obtain professional services in
preparing or implementing this Contract.
(4) the governments and stock exchanges or regulatory
authorities of either Party, provided the Parties
report to the Board of Directors in advance.
54. Continuing Obligations:
The obligations in this Chapter 13 are continuing obligations
and shall survive any expiry, non-effectiveness, termination,
cancellation or amendment of this Contract.
CHAPTER 14
ENVIRONMENTAL PROTECTION AND SAFETY
55. Compliance with Laws:
The JVC shall comply with the laws and regulations published
by the government of PRC in relation to environmental
protection and safety in the course of Operating Activities.
Neither Party B or the JVC shall be held liable to any damage
or destruction to or contamination of the environment during
the Term or caused by any third party or which has been
caused or existed before the establishment of the JVC.
56. Contacts with Government Instrumentality:
The JVC shall establish and maintain contact with Government
Instrumentality in relation to its operation. In this
respect, Party A shall take concrete actions to support and
to help with the preservation of public security and orderly
operation at and in the vicinity of all Operating Areas.
CHAPTER 15
TERMINATION OF JOINT VENTURE
57. Termination:
The term of the JVC shall expire 30 years from the date of
issuance of Business License to the JVC. At the request of
either Party and upon the approval of the Board of Directors,
an application for extension may be made to the original
Approval Authority at least 180 days prior to the expiry of
the term of the JVC.
58. Early Termination:
The JVC shall terminate on the expiry of the term of
cooperation unless any of the following circumstances occurs
which may constitute reasons for terminating this Contract
prior to expiry of the term:
(1) either Party materially breaches any provisions of this
Contract and fails to rectify such breach within 180
days after receiving a written notice of the breach
from the non-breaching Party.
(2) an event of force majeure makes it impossible to
implement this Contract and the Parties are unable to
find a solution thereto.
(3) the JVC suffers serious losses prior to the expiry of
the term of this Contract. or there is an unfavourable
change to the exploration and the production conditions
which makes it impossible to achieve the purpose of the
JVC and there is no means of rectification.
(4) either Party for any reason ceases being an independent
legal entity or is the subject of dissolution or
liquidation procedures or ceases its business or is
unable to pay its debts.
(5) both Parties consider that early termination of this
Contract is in the best interest of both Parties.
59. Liquidation:
Where this Contract expires or is terminated pursuant to the
Articles, the JVC shall:
(1) liquidate the assets, pay all debts, and distribute any
balance to the Parties pro rata to Share Interest.
(2) provide to each Party a complete list of assets.
(3) apply to cancel Business License.
60. Sale of Assets:
During the liquidation process, the General Manager will make
his/her best efforts to sell all assets of the JVC, by public
in private sale. Either Party may purchase part or the whole
of the assets of or the other Party's Share Interest in the
JVC at the fair market value to be agreed upon by the Parties
(if no agreement in writing, on the fair market value is
reached between the Parties within 30 days after the
liquidation commences, then an independent assessor may be
retained to determine the value). Assets may be used to
repay any debts of equivalent value owed to either Party.
CHAPTER 16
DISPUTE RESOLUTION
61. Basic Principle:
The Parties shall use their best efforts to settle amicably
through consultations any dispute arising in connection with
this Contract or its performance.
62. Arbitration:
Any dispute mentioned in Article 59 that has not been settled
through consultation within thirty (30) days after a Party
has requested in writing such consultation, may be referred
to by either Party to the Arbitration Institute of the
Stockholm Chamber of Commerce, Sweden at the location and in
accordance with the arbitration proceedings rules thereof,
including:
(1) three arbitrators will be used; and
(2) Party A and Party B shall each appoint an arbitrator
and the third arbitrator shall be appointed by the
Arbitration Institute who shall be the Chair of the
Tribunal. The arbitration award shall be final and
binding upon both Parties.
63. Continuing Performance:
During the arbitration, the Parties shall perform those
portions of the Contract over which there is no dispute
between the Parties and which are not subject to arbitration.
CHAPTER 17
FORCE MAJEURE
64. Force Majeure Events:
(1) Should either Party to this Contract be directly
affected in the performance of this Contract or be
prevented from performing its obligations under this
Contract in time by any event or occurrence not within
the control of the Party affected. including
earthquake, flood, fire, war, strike, riot, blockade,
public disorder, expropriation, nationalization, any
act or failure to act on the part of the government,
the occurrence and the consequences of which are
unpreventable and unavoidable, the Party so affected
shall notify the other Party in writing, and within
fifteen (15) days thereafter provide detailed
information of the event and valid documentary evidence
issued by a notary public of the place where the event
has occurred, and shall also use its best efforts to
mitigate the losses or damage caused by the event of
force majeure.
(2) The Parties shall, through consultations and by taking
into account the effect that event has on the
performance of this Contract, decide whether or not to
terminate this Contract, waive part of the obligations
hereunder or delay the performance of this Contract.
65. Contract Extension:
If the operation of the JVC is partially or entirely
suspended as a result of any force majeure event referred to
in Article 63 herein, the term of this Contract may be
extended by a period not exceeding the length of such
suspension, if so decided by the Parties.
CHAPTER 18
GOVERNING LAW
65. Existing PRC Laws:
This Contract and its interpretation and performance shall be
governed by the existing laws of PRC known to the public.
66. Impact of New Laws:
The Parties specifically agree that should Government
Instrumentality promulgate any new laws or regulations or any
amendment or change is made to the existing laws or
regulations which may adversely affect either Party or the
JVC, the Parties shall promptly consult and make necessary
amendments and adjustments to the relevant provisions of this
Contract in order to eliminate any such negative impact.
CHAPTER 19
NOTICE
67. Notice:
Any notice or communication to be given hereunder shall be
sufficiently given if delivered by courier or if transmitted
clearly by facsimile to the addresses as set forth below.
Any such notice shall be effective only upon actual delivery
or receipt thereof. The address for service or notice of
parties are:
(1) In the case of Party A:
Jixi, Heilongjiang, China
Tel: (▇▇▇) ▇▇▇-▇▇▇-▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇-▇▇▇▇
(2) In the case of Party B:
#▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Columbia, Canada V6C 2T8
Tel: (▇▇▇) ▇▇▇-▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇
CHAPTER 20
MISCELLANEOUS
68. Commencement of the Contract:
This Contract shall be effective on the date of the issuance
of the Business License.
69. Schedules:
All schedules attached hereto form parts of this Contract and
shall be binding upon the Parties.
70. Entire Agreement:
If any part of this Contract becomes invalid or ineffective
for any reason, the remaining parts of this Contract shall
continue to have effect and shall continue to be performed by
the Parties. At the same time the Parties shall take
effective rectifying measures to remedy the negative
consequence arising from such invalidity or ineffectiveness.
71. Supersession:
This Contract shall be final and shall supersede any and all
other agreements, oral or written, previously entered into
between the Parties, unless otherwise provided for in this
Contract.
72. Amendment:
No amendment to this Contract shall be valid unless made in
writing and signed by both Parties.
73. Language Discrepancy:
This Contract is written in both Chinese and English and both
versions shall have equal force and effect. Should there be
any dispute on the interpretation of this Contract or the two
versions thereof, the Parties shall resort to Chapter 16 for
the solution.
74. Time is of the essence:
Time is of the essence of this Contract. The Party which
fails to perform its obligations in time shall be responsible
for the consequences arising therefrom.
75. Enurement:
This Contract shall be binding upon and shall enure to the
benefit of both Parties and each of their respective
successors and permitted assigns.
IN WITNESS WHEREOF Party A and Party B have executed this
Contract.
LIUMAO GRAPHITE MINE
by its authorized signatory(ies):
//ss [illegible]
INTEGRATED CARBONICS CORP.
bv its authorized signatory(ies):
//ss [illegible]
COOPERATIVE JOINT VENTURE AGREEMENT
BETWEEN
HEILONGJIANG GEOLOGICAL AND MINING TECHNOLOGY DEVELOPMENT CORP.
AND
▇▇-▇▇▇▇ RESOURCES CORP.
August, 1997
CHAPTER 1
PARTIES OF THE COOPERATIVE JOINT VENTURE AGREEMENT
1. The two parties of this Contract and the JVC are:
(1) HEILONGJIANG GEOLOGICAL AND MINING TECHNOLOGY
DEVELOPMENT CORP.
(hereinafter referred to as "Party A"), legally
established and registered in Heilongjiang Province,
the People's Republic of China, China.
Address: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇-▇▇▇-▇▇▇▇
Legal ▇▇▇▇▇▇ ▇▇▇
Representative:
Title: General Manager
Nationality: Chinese
(2) ▇▇-▇▇▇▇ RESOURCES CORP.
(hereinafter referred to as "Party B"), of British
Virgin Islands, legally established and registered in
the British Virgin Islands.
Address: P.O. Box ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Islands
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Legal ▇▇▇▇▇ ▇▇▇▇▇▇
Representative:
Title: President
Nationality: Canadian
CHAPTER 2
DEFINITIONS
2. Unless otherwise provided in this Contract, the words and
phrases defined in this Contract shall have the same
meanings set forth herein:
"Administrative Budget" means the detailed estimation of all
expenses of the JVC in implementing relevant programs,
including the estimation for exploration, approved by the
Board of Directors.
"Articles" refers to Articles of Association of the JVC
containing detailed rules on the establishment and operation
of the joint venture company signed by the Parties as
amended from time to time.
"Approval Authority" means the relevant Chinese governmental
organ or organs, or any department to which authority has
been delegated, which, in accordance with the prevailing
Chinese laws, has the power to approve or not to approve
this Contract or other agreements and documents in
connection with this Contract.
"Board of Directors" refers to the Board of Directors of the
Joint Venture Company.
"Business License" means the license issued by the Chinese
government to the Joint Venture Company allowing it to carry
on business and operate in China.
"Contract" means this agreement and all the attachments and
amendments hereof.
"Contract Areas" means the areas of Heilongjiang over which
Party A holds a direct or indirect mining rights tenure or
permission and in which the Parties intend to carry out any
Operating Activities pursuant to the terms and conditions of
this Contract. However, the ownership of the existing mines
in the Contract Areas is not covered in this definition.
"Contract Rights" includes all agreements, contracts, rights
or offerings obtained from third parties including
Government Instrumentality, as well as all other rights
including right or interest derived from any option
agreement, leases or other contracts, and exploration
permits and mining licenses, permitting the Parties to carry
out any Operating Activities set out hereunder.
"Costs" means all costs and expenses incurred by the JVC or
Parties on behalf of the JVC on Operating Activities in the
Contract Areas or Operating Areas, such as site costs, costs
of explorations, samplings, survey and investigations,
tests, drillings, environmental studies, applying and
maintaining Mining Rights, engineering designs,
constructions of buildings, manufacturing and purchase of
equipment and machinery, development, smelting, expenses for
foreign or Chinese geologists or other experts, independent
engineering, expenses for technical or professional
opinions, costs of acquiring existing geological data and
compensation for the prior geological work, salaries, wages,
benefits, administrative and travel expenses.
"Exploration" means all acts in relation to determination of
the existence, locations, quantities, qualities or the
commercial value of minerals.
"Exploration Area" or "Exploration Areas" means an area or
areas, within the Contract Areas in which the JVC may decide
to carry out any Operating Activities.
"Exploration Licenses" means the licenses, permits or
rights, to conduct exploration activities within the
Operating Areas granted by Government Instrumentality.
"Exploration Program" means any program or plan formulated
by the JVC's geologists and engineers for the exploration of
an Operating Area or Operating Areas.
"Exploration Unit" or "Exploration Units" means an area or
areas, each 1 km2 in size, forming the basic units of an
Exploration Area.
"General Manager" or "Deputy General Manager" means the
individual or entity appointed pursuant to Article 35
herein.
"Government Instrumentality" means any state, provincial,
city , municipal or local government and any department
thereof, or the central bank, court, commission, bureau or
board exercising any regulation, expropriation or taxing
authority under or for the account of any of the foregoing.
"Joint Venture Company" or "JVC" means the cooperative joint
venture company established by the Parties pursuant to
Chapter 4 herein.
"Minerals" means all base and precious metals, industrial
minerals that are discovered or are present within the
Exploration Areas.
"Mining" means mining, extraction, production,
transportation, treatment, filtering or any other mining
production process, including the processing of by-products
and products refining using any method.
"Mining Rights" means mining licenses and contract rights
held by the JVC in the Operating Areas.
"MGMR" means the Ministry of Geology and Mineral Resources
of PRC.
"Operating Activities" means all proprietary activities of
the JVC, including feasibility studies, ore dressing,
prospecting, processing, construction of processing plants
or other activities in relation to mining, transportation,
smelting, or other activities in relation to Minerals
conducted by or on behalf of the JVC.
"Operating Area" or "Operating Areas" means the area or
areas, each comprising a number of Exploration Areas,
defined by geological, mineral and geographic restraints, in
which the JVC decides to carry out any Operating Activities
pursuant to an Operating Budget and Operating Procedures.
"Operating Budget" means the budget prepared by Party B for
each Operating Area estimated on the basis of RMB 2,000 per
km2 on average, to be submitted to the JVC for
implementation.
"Operating Licenses" means all Business License, Exploration
Licenses, Mining Licenses, approvals, permits and
registrations that the JVC may need to operate in Contract
Areas and/or Operating Areas.
"Operating Procedures" means the procedures formulated by
the Board of Directors for carrying out and maintaining
Operating Activities.
"Operating Schedule" means the schedule substantially in the
form shown in Schedule "B" attached hereto and determined by
the Board of Directors according to which Operating
Activities are conducted and completed.
"Option" means the exclusive right and option granted by
Party A to Party B for the acquisition of any or all of
Party A's interest in any Optional Project.
"Optional Project" or "Optional Projects" means any existing
mines owned wholly or partly by Party A within the Operating
Areas.
"Parties" means Party A and Party B as well as their
successors and permitted assigns, and "Party" means either
party.
"Phase I" means the stage of prospecting and exploration and
ends with completion of feasibility studies.
"Phase II" means the stage of mining, development and
production of mines discovered in Phase I.
"PRC" means the People's Republic of China.
"Products" means mineral products produced under mining
rights or other rights.
"Shareholders" means any individual or entity holding the
shares of the JVC. (Initially Party A and Party B).
"Share Interest" means a party's percentage of share
interest in the JVC as adjusted from time to time.
"Subsidiaries" means any individual, partnership, joint
venture, companies or any other business entities controlled
directly or indirectly by a Party.
"Work Days" means all the days in a year less Saturdays,
Sundays and the Chinese Statutory Holidays.
CHAPTER 3
REPRESENTATIONS AND WARRANTIES
3. Party A hereby represents and warrants as follows:
(1) Party A is a subsidiary of Heilongjiang MGMR and as
such ahs all necessary legal rights and authority to
carry out business in the Province of Heilongjiang as
contemplated by this Contract.
(2) Party A is familiar with the Chinese laws, regulations
and policies relating to the foreign cooperative
exploration of Minerals.
(3) Party A has obtained or is able to obtain the consent
and/or approval of the Government Instrumentality in
relation to the execution of this Contract and the
performance of the obligations hereunder.
(4) Party A's signing, interpretation and execution of this
Contract shall not:
(A) be in conflict with its own purpose and the
purposes of the MGMR and the Articles of the JVC.
(B) be in conflict with any laws, regulations, rules,
orders or judgments of PRC which Party A must
comply with; and
(C) be in conflict with agreements Party A has reached
with any other party.
(5) Any Party A's activities in the Operating Areas do not
involve any substantive amount of toxic substances, and
contaminants or discharge and substances to such
Operating Areas.
(6) Unless otherwise specified hereunder, the JVC shall pay
all taxes in accordance with the laws of PRC.
(7) Party A shall provide no less than 4,000 km2 to Party B
for exploration.
4. Party B represents and warrants that:
(1) Party B is incorporated under the law of the British
Virgin Islands, and is in good standing and valid
existence.
(2) Party B has all the power and authority to execute this
Contract and perform the obligations thereunder and
none of its actions are subject to the consent or the
approval of the government of the British Virgin
Islands.
(3) This Contract will be effective and binding once signed
by Party B and approved by the Approval Authority.
(4) Party B agrees that it shall fully and in good faith
perform each of the obligations set out in this
Contract and shall exercise each of its rights under
this Contract in a reasonable manner.
(5) The input of funds shall be made in accordance with the
investment schedule, and under Operating Budget and
Administrative Budget.
(6) All members of Party B shall comply with PRC laws and
regulations, and local and cultural tradition during
their stay in China.
(7) Party B shall ensure the total investment amount and
will make no less than the amount specified in Schedule
"A" to the JVC. More specifically, Party B shall
invest to the JVC no less than RMB 2,000 per km2 in
which exploration activities are carried out. Party B
shall ensure that the minimum investment amount per km2
is achieved and that the exploration programs are
completed.
CHAPTER 4
ESTABLISHMENT OF THE JOINT VENTURE COMPANY
5. Name of the JVC:
(1) The Chinese name of the JVC shall be: Heilongjiang
Jinlong Mining Co. Ltd.
(2) The English name of the JVC shall be: Heilongjiang
Gold Dragon Mining Co. Ltd.
6. The Business Address of the JVC:
The business address of the JVC shall be #▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇.
7. Compliance of Laws:
All activities of the JVC shall comply with the laws,
regulations and rules of the PRC, and all its proper
business activities and legal rights shall be protected by
the PRC Laws.
8. Establishment of the JVC:
Party A and Party B hereby agree that they shall cause the
JVC to be established upon signing of this Contract on the
basis of the Articles and pursuant to the Law of the
People's Republic of China on China Foreign Cooperative
Joint Ventures, the Detailed Implementing Regulations for
the Law of the PRC on Cooperative Joint Ventures and the
provisions of other Chinese laws and regulations relating to
mining.
9. Responsibility of the Company:
The JVC shall be responsible for its own debts and assets.
Neither Party shall be liable for any debts owed by the JVC
to any third party. Either Party shall only be liable to
the extent of its investment in the JVC.
10. Profits:
The net after tax profits or dividends of the JVC shall be
distributed pro-rata to the Share Interest of the Parties.
11. No Agency:
There is no agency relationship between the Parties and this
Contract does not designate either Party as the agent or
legal representative of the other Party or the JVC. Unless
expressly provided in the provisions of this Contract,
neither Party shall have the power to represent the other
Party or the JVC in connection with any obligations or
responsibilities hereunder.
CHAPTER 5
PURPOSE, BUSINESS SCOPE AND TERM OF COOPERATIONS
12. Purpose:
The purpose of the JVC shall be to enhance economic
cooperation and technical exchange, to use advanced and
appropriate technical and scientific management methods, and
to conduct exploration and other mining activities, so as to
permit the Parties to achieve satisfactory economic benefits
and investment returns, all on the basis of the principles
of fairness, legality, quality and mutual benefit.
13. Business Scope:
The business of the JVC shall be exploration, production and
processing of Minerals, including base and precious metals,
and industrial minerals in order to extract and process such
Minerals or related products.
14. Business in the name of the JVC:
All business exchanges, transactions, contracts, purchases,
operations, negotiations, employment or any activities on
behalf of the Parties shall be conducted in the name of the
JVC, unless expressly set out in this Contract. Neither
Party shall carry on any above-mentioned activities in its
own name, in the other Party's name or in the name of both
Parties in the Operating Areas.
15. Limitation of Scope of the Contract:
Either Party is permitted under this Contract to carry on
similar or competitive operational activities outside the
Contract Areas. However, both Parties will make its best
efforts to perform the obligations to the JVC under the
Contract.
16. Term of the JVC:
The Term of the JVC shall be 30 years commencing on the date
of the issuance of Business License of the JVC.
17. Operation in Operating Areas:
No suspension, delay or termination of any operation in any
Exploration Units, Exploration Areas or Operating Areas
shall affect the operation, including the Operating Budget,
Operating Schedule and Operating Procedure, of any other
Exploration Units, Exploration Areas or Operating Areas or
the Parties' performance of obligations under this Contract.
The JVC may decide, based on the recommendations of
geologists and in view of the best interest of the JVC, to
discontinue or suspend operation in any Exploration Unit or
Exploration Area or Operating Area.
CHAPTER 6
TOTAL INVESTMENT, REGISTERED CAPITAL AND TRANSFER
18. Investment and Registered Capital:
The total investment of the JVC shall be the gross amount of
all the funds required to complete the Operating Activities
in the Operating Areas as determined by the Parties from
time to time on the basis of progress and findings in the
Operating Areas during the term of this Contract but shall
not in any case exceed US#28,000,000 unless decided
otherwise by the Parties pursuant to Article 25 hereunder.
19. Phased Operation:
The operation of the JVC shall be divided into Phase I and
Phase II. Each Party's Share Interest in Phase I shall be
50%.
Phase I commences on the date of the issuance of Business
License and shall continue until all exploration planning,
prospecting, surveying, drilling, all other exploration
works and feasibility studies are completed.
Upon completion of Phase I, Party B's Share Interest shall
be increased to 75% and Party A's Share Interest shall
become 25%. Phase II commences upon decision of the Board
of Directors, based on review and approval of the
feasibility studies report, to proceed with mine and plant
construction in any or all of the Operating Areas.
20. Phased Investment:
(1) The Parties' investment in Phase I shall be as follows:
(A) Party A shall transfer all Operating Licenses, if
any, to the JVC and/or shall, on behalf of the
JVC, immediately and expeditiously secure or
maintain Operating Licenses so that the JVC shall
be able to operate in the Contract Areas or
Operating Areas, as the case may be, and shall
provide all existing and relevant geological data,
as contribution to the JVC.
(B) Party B shall pay the cost of securing Operating
Licenses incurred by Party A on behalf of the JVC.
The exact amount of such payment shall depend on
the total areas to be covered by the Operating
Licenses and shall be determined by the Parties in
Schedule "A" attached hereto.
(C) Party B shall, prior to signing of this Contract,
supply RMB80,000 as compensation for geological
data prepared by Party A. Upon the JVC receiving
its Exploration Licenses, Business License and any
other required permits or approvals necessary for
the commencement of operation in the Operating
Areas, Party B shall input RMB800,000 to the JVC
and the JVC shall pay this sum to Party A as
compensation for all prior geological work
performed by Party A in relation to the Operating
Areas.
(D) Party B shall supply funds in amounts sufficient
to complete Operating Activities contemplated
under Exploration Programs which have been
submitted by either its own geologists or
independent geologists and approved by the Board
of Directors.
(E) No stocks shall be issued and no loans shall be
borrowed in the name of the JVC in Phase I.
(2) The Parties' investment in Phase II shall be as
follows:
(A) For Party A, 25% of all funds needed for Operating
Activities of the JVC in any and all Operating
Areas.
(b) For Party B, 75% of all funds needed for Operating
Activities of the JVC in any and all Operating
Areas.
21. Parties' obligations in Phase I:
(1) Party A shall:
(a) collect, compile and provide all geological data
and information in relation to Operating Areas or
Exploration Areas to be submitted to Party B.
(b) apply for, obtain or maintain Operating Licenses
for Operating Activities within the Operating
Areas.
c recommend to JVC Operating Areas for prospecting,
exploration and development.
(d) assist Party B in assessment of Operating Areas
and preparation of feasibility studies.
(e) where an Operating Area or Operating Areas are
owned by a third party which is a subsidiary,
affiliate of or a party related to Party A, Party
A shall make such efforts so that such a third
party may be acquired or merged with the JVC in
order to facilitate investment by Party B.
(2) Party B shall:
(a) provide funds pursuant to Article 20 hereunder for
necessary business activities in Phase I.
(b) facilitate the JVC in retaining or recruiting
foreign experts and management personnel.
c assist the JVC in the importation of technology,
equipment and materials for the Operating
Activities.
(d) conduct feasibility studies.
22. Parties' obligations in Phase II:
(1) Party A shall:
(a) supply 25% of all funds required for Operating
Activities in Operating Areas.
(b) conduct Operating Activities as required of Party
A under this Contract.
(2) Party B shall:
(a) supply 75% of all funds required for Operating
Activities in Operating Areas.
(b) conduct Operating Activities as required of Party
B under this Contract.
23. Confirmation of Investment:
Each time when a Party has made its investment to the
capital of the JVC, an accountant registered in China and
appointed by the Board of Directors shall verify the
contribution and issue a contribution verification report
within 60 days after the receipt of the contribution.
Within 30 days after the receipt of the verification report,
the JVC shall issue an investment certificate in accordance
with regulations governing joint venture enterprises. The
investment certificate shall be signed by the Chairman and
the Vice-Chairman of the Board of Directors.
24. Conditions Precedent:
If any of the provisions below is not satisfied or expressly
waived by both Parties, neither Party shall have any
responsibility to make any contribution to the JVC:
(1) This Contract is executed by the Parties and is in
compliance with the laws of PRC.
(2) This Contract and the Articles executed by the Parties
are approved by the Approval Authority with no material
amendment to the provisions thereof, and without any
additional requirements imposed upon either Party or
the JVC, unless both Parties are informed in advance of
such requirements and have given consent in writing.
(3) The Business License is issued with the scope of
business as provided for in Article 13 hereunder. Both
Parties should receive notice in advance and provide
confirmation in writing should there be any change in
the scope of business.
(4) All relevant agreements listed in this Contract are
executed and approved by the Board of Directors, and
confirmed by the JVC. If required by law, the relevant
agreements have been approved by the Approval
Authority.
(5) All Operating Licenses are issued and transferred to
the JVC without any liabilities or encumbrance attached
thereto.
The Parties agree that within three (3) months after the
issuance of the Business License or within five (5) months
after signing of this Contract by both Parties or during any
extended period of time as agreed to by the Parties, if any
of the conditions above is not satisfied or the Parties have
not waived such a condition, either Party is entitled to
give notice to the other Party in writing of the termination
of the Contract. Thereafter, neither Party shall be under
any obligation to make any investment in the JVC.
25. Adjustment of Capital:
Any increase or reduction in the Registered Capital or the
total investment in the JVC must have both Parties written
agreement, the unanimous endorsement of the Board of
Directors and approval of the Approval Authority.
26. Financing:
The JVC shall mainly rely on Party B for investment. If
there is any shortage of funds when formal mining production
commences (Phase II), the JVC may raise funds in and outside
China to cover the difference between the total investment
and the registered capital. Party A shall help the JVC to
obtain funds within China and Party B shall help the JVC to
obtain funds overseas at competitive terms.
27. Transfer and Assignment of Share Interest:
(1) Either Party may transfer, assign or sell all or part
of its Share Interest in the JVC to a third party or
third parties. Such transfer, assignment or sale of a
Share Interest in the JVC will require the consent of
the other party and approval by the relevant
authorities. Each Party represents that such transfer,
assignment or sale of Share Interest in the JVC will
not affect the Share Interest of the other Party. The
Party transferring, assigning or selling its Share
Interest shall be responsible to ensure the financial
and technical ability of the third party.
(2) Either Party may by separate agreement invite a third
party or parties to participate in the exploration and
or development of the Operating Area(s) and may as
required by the separate agreement transfer, assign or
sell part or all of its interest in the Operating
Area(s). Each Party represents that any such transfer,
assignment or sale of its interest in the Operating
Area(s) shall not affect this Contract or the other
Party's interest and shall become effective upon
approval of the relevant authorities.
28. Failure to Provide Investment Funds:
Subject to Article 17 herein, if a Party fails to provide
any or all the funds contemplated in Article 20(2) of
Chapter 6, then the other Party may supply the funds, and
that Party's interest in the Operating Areas and the JVC
shall be increased accordingly on a pro rata basis.
CHAPTER 7
ADDITIONAL OBLIGATIONS OF THE PARTIES
29. Party A's Additional Obligations:
Party A shall timely and expeditiously perform the following
obligations:
(1) to assist the JVC in its consultation and negotiation
with Government Instrumentality to ensure that the JVC
will be able to operate in accordance with relevant
rules and regulations, and that Party B's rights and
interests are protected; to obtain or assist the JVC in
obtaining its business license, tax registration,
MOFTEC approvals and any other necessary permits or
approvals.
(2) to provide lands for operation and office uses and
labour to the JVC at a competitive price.
(3) to assist the JVC in the importation of equipment and
to facilitate transportation of such equipment within
PRC.
(4) to assist the JVC in the procurement or lease of any
equipment, material, office supplies, vehicles and
telecommunication equipment.
(5) to assist the JVC in securing infrastructures and
services such as the supply of water, power and roads.
(6) to recommend, at the request of Party B or the JVC, to
Party B or the JVC, Optional Projects, and to
facilitate the acquisition of such Optional Projects.
(7) to handle any other matters requested by the JVC.
30. Party B's Additional Obligations:
Party B shall timely and expeditiously perform the following
obligations:
(1) to assist the JVC in the purchase and importation of
equipment, instrument, machinery, vehicles and other
equipment to be imported.
(2) to assist the JVC through the use of foreign experts,
advisers or agents at competitive rate.
(3) to obtain financing when so needed by the JVC.
(4) to contract or subcontract professionals or labour when
necessary.
(5) to handle any other matters once so requested by the
JVC.
CHAPTER 8
BOARD OF DIRECTORS
31. Appointment of Directors:
The Board of Directors shall be formed on the date this
Contract is signed by both Parties to the JVC. The Board of
Directors shall comprise seven (7) members, of which Party A
shall appoint three and Party B shall appoint four. Each
director shall serve a term of three (3) years, which term
can be extended upon expiry by the written confirmation of
the Appointing Party. Either Party can be written notice to
the JVC, dismiss a director it has appointed. Should any
vacancy arise as a result of retirement, dismissal,
resignation, sickness, disability or death, the Appointing
Party shall appoint a new director for the remainder of the
term arising from the vacancy.
32. Chairman and Vice-Chairman of the Board:
The Chairman of the Board of Directors shall be appointed by
Party B and there shall be one Vice-Chairman which shall be
appointed by Party A. The Chairman of the Board is the
legal representative of the JVC and shall only conduct his
or her work within the terms of reference authorized by the
Board of Directors. When the Chairman is unable to perform
the obligations, the Board will appoint the Vice-Chairman or
any director as the legal representative of the JVC.
33. Resolutions of the Board:
The Board of Directors shall be the JVC's supreme organ.
The quorum of the Board meeting shall be 5 directors.
Resolutions of the Board on general matters of the JVC may
be adopted by simple majority. However, the following
action can be taken only with the unanimous resolutions of
the directors who attend a Board of Directors' meeting:
(1) amendment of the JVC's Articles.
(2) merger, division or change of the JVC's organization.
(3) increase or decrease of the number of shares issued for
the purpose of financing by the JVC, application for
loans, and the increase and transfer of registered
capital.
(4) liquidation or dissolution of the JVC.
(5) mortgage of the JVC's assets.
34. Meetings of the Board:
(1) The Board of Directors shall meet at least once a year.
However, if two-thirds or more of directors so request,
an interim meeting of the Board of Directors may be
convened. Meetings of the Board of Directors shall be
convened and chaired by the Chairman, and in the
absence of the Chairman, by the Vice-Chairman. The
Chairman shall give written notice of the Board of
Directors meeting to each director at least 30 days
before the date of the meeting. The notice shall set
out the agenda, time and place of the meeting. Any
director unable to attend a Board of Directors meeting
for any reason, may by written notice appoint a proxy
to attend the meeting. If a director does not attend a
meeting and does not appoint a proxy, he shall be
deemed to have waived his rights to the meeting. If
the Chairman and Vice-Chairman agree, other persons
including experts may be invited to attend a Board of
Directors meeting as observer, but such observers shall
have no right to vote.
(2) The detailed minutes of each meeting of the Board of
Directors shall be signed by the Chairman and Vice-
Chairman of the Board of Directors and then circulate
to every director. The minutes and resolutions shall
be written in both Chinese and English and shall be
kept in the JVC's records once signed by directors who
have attended the meeting.
CHAPTER 9
MANAGEMENT STRUCTURE
35. Management:
(1) The JVC shall establish a business management organ to
be responsible for the day-to-day operation and
management of the JVC. The management organ shall
include the General Manager and the Deputy General
Manager. The JVC shall have a General Manager and a
Deputy General Manager whose appointment shall be
approved by the Board of Directors. The General
Manager shall be nominated by Party A and the Deputy
General Manager shall be nominated by Party B, each for
a term of three years. The term of engagement may be
extended by the Board of Directors. The Board of
Directors shall oversee the performance of the General
Manager and Deputy General Manager of the Company who
shall take charge of the management of the JVC's day-to-
day business and operations in accordance with this
Contract and the resolutions of the Board of Directors
and, through such departments as production,
technology, sales, finance, administration, shall
organize and the lead the implementation of the
development, production, sales, processing of the JVC.
(2) All major decisions on the day-to-day operations of the
JVC shall be effective only with the signature of both
the General Manager and Deputy General Manager. The
Board of Directors shall decide on what matters require
the signature of both the General Manager and Deputy
General Manager.
36. Exploration Programs
The JVC's geologists and/or engineers shall carry out Board
approved Exploration Programs in compliance with the
Operating Schedules. Where Exploration Programs are carried
on without third party participation, the JVC's engineers
and or geologists shall act under the leadership of the
General Manager and Deputy General Manager. Where
Exploration Programs are carried on with third party
participation, the JVC's engineers and/or geologist, General
Manager and Deputy General Manager shall act in cooperation
with or under the supervision of the third party's engineers
and geologists in accordance with the Exploration Programs
and Operating Schedules approved by the Board of Directors.
37. Subcontract:
Party B or the JVC may, from time to time and a subcontract
price to be determined on a case by case basis, subcontract
Party A or any of its subsidiaries of affiliates to provide
services in relation to any Operating Activities to be
conducted by Party B or the JVC.
38. Work Standards:
The General Manager and the Deputy General Manager shall
perform to the highest industry standards and efficiency,
and shall observe mining and other relevant industry
practice, and observe the laws of PRC. Where the General
Manager or the Deputy General Manager are grossly negligent
or engaged in malpractice, they may be dismissed and
replaced by resolutions of the Board of Directors' meetings.
CHAPTER 10
FINANCIAL ACCOUNTING
39. Monthly Financial Report:
The JVC shall practice the Chinese accounting system under
Chinese Laws. The General Manager shall provide to each
Party a financial report on or before the 20th day of a
calendar month to reflect the balance of the JVC in the
previous month. The General Manager shall provide a
financial report for the previous year in January every
year. The JVC's accounting year commences January 1 and
ends December 31 every calendar year.
40. Currency:
The JVC shall use both United States Dollars and Renminbi as
its reporting currency for bookkeeping.
41. Language for Accounting:
All JVC's vouchers and accounting books shall be written in
Chinese and the JVC's annual financial statements shall be
written in both English and Chinese and the accounting firm
shall prepare one copy of annual financial statement in
accordance with Generally Accepted Accounting Principle
(GAAP) for Party B.
42. Foreign Exchange Balance:
The JVC shall establish foreign exchange and Renminbi bank
accounts at banks to be chosen by the Board of Directors.
The JVC shall, in accordance with the laws and requirements
of PRC, apply for and maintain foreign exchange
certificates. The JVC will obtain sufficient foreign
exchange to meet its needs. All expenses incurred in
currency conversion will be deemed as the JVC's operational
expenses.
43. Product Sales:
The JVC shall sell its Products pursuant to the laws and
regulations of PRC.
44. Products Price:
The price of the JVC's Products shall be determined by the
General Manager and Deputy General Manager and approved by
the Board of Directors in accordance with the laws and
regulations of PRC and the price guidelines formulated by
the Board of Directors.
CHAPTER 11
TAX AND AUDIT
45. Taxes Payable:
The JVC shall pay taxes in accordance with the applicable
laws and regulations of PRC, and shall enjoy the
preferential tax treatment it is entitled to under the
Income Tax Law for Foreign Investment Enterprises and other
applicable laws and regulations of PRC. In respect, Party A
shall give its utmost assistance.
46. Profits Distribution:
Profits shall be distributed to the Parties according to the
following principle:
(1) the Board of Directors shall, within four months of the
end of a financial year, and after deductions are made
for common reserve, worker's compensation and pension,
decide on the amount of retained earnings and the pro-
rata distribution of dividend. The dividend to be
distributed to the Parties shall not exceed 75% of the
profit.
(2) any gross profit generated annually in any of the
Operating Areas shall first be used for payment of
taxes, fees and charges in accordance with the
provisions of applicable tax laws and regulations of
PRC, and the remainder shall be the profit to be
allocated between Party A and Party B in accordance
with their Share Interest.
(3) Party B shall enjoy priority in receiving foreign
exchange payment in any profit of the JVC. Foreign
exchange will be U.S. Dollars converted from Renminbi,
with the conversion rate being the average sell and buy
rate at the People's Bank of China of the date when the
Board of Directors decides to distribute profits. If
the JVC does not have sufficient foreign exchange to
advance to Party B, the JVC shall, as instructed by
Party B, convert the Renminbi profit payable to Party B
at the bank at the average exchange rate for foreign
exchanges, and pay such converted foreign exchange to
Party B. If the JVC is unable to make such converted
foreign exchange to Party B. If the JVC is unable to
make such conversion, then is shall, as instructed by
Party B, deposit an equivalent amount in Renminbi in an
independent savings account opened in the name of the
JVC. The JVC or Party A shall not use the principal or
interest thereon in this account. If Party B's
instructions are requirements comply with the laws of
PRC, the JVC should immediately perform the
instructions of Party B to deposit Party B's profits
into the bank account.
47. Inspection and Auditing:
The auditing of the accounts of the JVC shall be conducted
through accounting firms registered in China.
CHAPTER 12
INSURANCE
48. Board to Decide:
The JVC shall take out insurance from the Chinese People's
Insurance Company or another insurance company registered in
the PRC in instance where the Chinese People's Insurance
Company cannot provide adequate coverage or the necessary
form of insurance.
49. Insurance Plan:
The insurance plan of the JVC may include anyone or more of
the following or other items as may be agreed upon by the
Board of Directors:
(1) damages to and expenses of all drilling installations
and equipment and other assets, including damages to
and expenses of the assets used on work sites or supply
basis for any mining operations.
(2) any equipment or installations for productions, storage
or transportation or processing facilities or
buildings.
(3) the JVC's use or lease or any equipment, facilities,
vehicles, etc. for providing services to or for the
implementation of the mining operations.
(4) losses and expenses incurred during the transportation
or storage - in-transit of goods and materials.
(5) the labour, life and pension insurance of employees of
the JVC.
50. As Operating Costs:
All insurance expenses shall be recorded as operating costs.
CHAPTER 13
LABOUR MANAGEMENT
51. Labour Policy:
All decisions on retirement, employment, termination,
resignation as well as employee benefits shall be made on
the basis of the Labour Law, Labour Management Relations for
Foreign Invested Enterprises and other applicable laws of
PRC (hereinafter collectively the "Labour Law"). The JVC's
regulations on labour management shall be approved by the
Board of Directors and implemented by the General Manager.
52. Employment Contract:
The JVC shall enter into employment contract individually
with employees. The JVC shall employ management personnel
based on the requirement and the standard set by the Board
of Directors.
53. Benefits:
The JVC shall provide expatriates salaries and benefits at a
level compatible to the salaries and benefits received by
expatriates in similar positions in other mining enterprises
with foreign investment established in Harbin, China. The
JVC shall provide salaries and benefits to the Chinese
employees, in compliance with the Labour Law and compatible
to the salaries and benefits received by Chinese employees
in similar positions in enterprises with foreign investment
established in Harbin, China.
54. Hiring:
The JVC shall employ people base on their skills, character
and work experience. The General Manager and Deputy General
Manager shall make decisions as to the number and level of
employees to be hired based on the needs of the JVC. All
employees are subject to a six month probation before they
are formally employed by the JVC.
CHAPTER 14
CONFIDENTIALITY
55. General Provisions:
This Contract and all related documents, materials,
technical, geological and financial data and reports shall
be kept strictly confidential. Except otherwise provided
for in this Contract, no content of the aforementioned
documents shall be disclosed to a third party or the public
without the prior written consent of the other Party, which
consent shall not be unreasonably withheld.
56. Term and Confidentiality:
The term of confidentiality shall end one (1) year after the
termination of this Contract. If a Party has transferred
all its interests, then that Party will be bound by the
confidentiality provisions for two years after the transfer.
57. Exceptions:
The JVC may, as decided by the Board of Directors, furnish
necessary documents, information, data and reports to a
third party or affiliates. Such third party and affiliate
may include:
(1) banks or other credit institutions from which financing
is sought by either Party to this Contract for the
implementation of this Contract.
(2) a potential assignee or assignees to whom rights
and/or obligations under this Contract may be assigned.
However, the assigning party shall ensure the credit
worthiness of the assignee.
(3) professionals such as lawyers and accountants from whom
either Party wishes to obtain professional services in
preparing or implementing this Contract.
(4) the governments and stock exchanges of either Party,
provided the Parties report to the Board of Directors
in advance.
58. Continuing Obligations:
The obligations in this Chapter 14 are continuing
obligations and shall survive any expiry, non-effectiveness,
termination, cancellation or amendment of this Contract.
CHAPTER 15
ENVIRONMENTAL PROTECTION AND SAFETY
59. Compliance with Laws:
The JVC shall comply with the laws and regulations published
by the government of PRC in relation to environmental
protection and safety in the course of Operating Activities.
The JVC shall not be held liable to any damage or
destruction to the environment which has been caused or
existed before the establishment of the JVC.
60. Contacts with Governmental Instrumentality:
The JVC shall establish and maintain contact with Government
Instrumentality in relation to its operation. In this
respect, Party A shall take concrete actions to support and
to help with the preservation of public security and orderly
operation at and in the vicinity of all Operating Areas.
CHAPTER 16
TERMINATION OF JOINT VENTURE
61. Termination:
The term of the JVC shall expire 30 years from the date of
issuance of Business License to the JVC. At the request of
either Party and upon the approval of the Board of
Directors, an application for extension may be made to the
original Approval Authority at least 180 days prior to the
expiry of the term of the JVC.
62. Early Termination:
The JVC shall terminate on the expiry of the term of
cooperation unless any of the following circumstances occurs
which may constitute reasons for terminating this Contract
prior to expiry of the term:
(1) either Party materially breaches any provisions of this
Contract and fails to rectify such breach within 90
days after receiving a written notice of the breach
from the non-breaching Party.
(2) an event of force majeure makes it possible to
implement this Contract and the Parties are unable to
find a solution thereto.
(3) the JVC suffers serious losses prior to the expiry of
the term of this Contract, or there is an unfavourable
change to the exploration and the production conditions
which makes it impossible to achieve the purpose of the
JVC and there is no means of rectification.
(4) either Party for any reason ceases being an independent
legal entity or is the subject of dissolution or
liquidation procedures or ceases its business or is
unable to pay its debts.
(5) both Parties consider that early termination of this
Contract is in the best interest of both Parties.
63. Liquidation:
Where this Contract expires or is terminated pursuant to the
Articles, the JVC shall:
(1) liquidate the assets, pay all debts, and to distribute
any balance to the Parties pro rata to Share Interest.
(2) provide to each Party a complete list of assets.
(3) Apply to cancel Business License.
64. Sale of Assets:
During the liquidation process, the General Manager will
make his/her best efforts to sell all assets of the JVC,
including Mining Rights. Either Party may purchase part or
the whole of the assets of the JVC at the fair market value
to be agreed upon the Parties (if no agreement in writing on
the fair market value is reached between the Parties within
30 days after the liquidation commences, then an independent
assessor may be retained to determine the value). Assets
may be used to repay any debts of equivalent value owed to
either Party.
CHAPTER 17
DISPUTE RESOLUTION
65. Basic Principle:
The Parties shall use their best efforts to settle amicably
through consultations any disputes arising in connection
with this Contract or its performance.
66. Arbitration:
Any dispute mentioned in Article 66 that has not been
settled through consultation within seven (7) days after a
Party has requested in writing for such consultation, may be
referred to by either Party to Beijing International
Economic and Trade Arbitration Commission of China in
accordance with the arbitration proceedings rules thereof,
including;
(1) all proceedings of the arbitration will be conducted in
Chinese;
(2) three arbitrators will be used and all should have
Chinese proficiency; and
(3) Party A and Party B shall each appoint an arbitrator
and the third arbitrator shall be appointed by the
Arbitration Commission who shall be the Chair of the
Tribunal. The arbitration award shall be final and
binding upon both Parties.
67. Continuing Performance:
During the arbitration, the Parties shall perform those
portion of the Contract over which there is no dispute
between the Parties and which are not subject to
arbitration.
CHAPTER 18
FORCE MAJEURE
68. Force Majeure Events:
(1) Should either Party to this Contract be directly
affected in the performance of this Contract or be
prevented from performing its obligations under this
Contract in time by any event or occurrence not within
the control of the Party affected, including
earthquake, flood, fire, war, strike, riot, blockade,
public disorder, expropriation, nationalization, any
act or failure to act on the part of the government,
the occurrence and the consequences of which are
unpreventable and unavoidable, the Party so affected
shall notify the other Party in writing, and within
fifteen (15) days thereafter provide detailed
information of the event and valid documentary evidence
issued by a notary public of the place where the event
has occurred, and shall also use its best efforts to
mitigate the losses or damage caused by the event of
force majeure.
(2) The Parties shall, through consultations and by taking
into account the effect that event has on the
performance of this Contract, decide whether or not to
terminate this Contract, waive part of the obligations
hereunder or delay the performance of this Contract.
69. Contract Extension:
If any or all the Operating Activities in any Operating
Areas are partially or entirely suspended as a result of any
force majeure event referred to in Article 68, the operation
in any such Operating Areas or the term of this Contract may
be extended by a period not exceeding the length of such
suspension.
CHAPTER 19
GOVERNING LAW
70. Existing PRC Laws:
This Contract and its interpretation and performance shall
be governed by the existing law of PRC known to the public.
71. Impact of New Laws:
The Parties specifically agree that should Government
Instrumentality promulgate any new laws or regulations or
any amendment or change is made to the existing laws or
regulations which may adversely affect either Party or the
JVC, the Parties shall promptly consult and make necessary
amendments and adjustments to the relevant provisions of
this Contract in order to eliminate any such negative
impact.
CHAPTER 20
NOTICE
72. Notice:
Any notice or communication to be given hereunder shall be
sufficiently given if delivered by courier or if transmitted
clearly by facsimile to the addresses as set forth below.
Any such notice shall be effective only upon actual delivery
or receipt thereof. The address for service or notice of
parties are:
(1) IN the case of Party A:
#▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
(2) In the case of Party B:
#▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
CHAPTER 21
MISCELLANEOUS
73. Commencement of the Contract:
This Contract shall be effective the date of the issuance of
the Business License.
74. Entire Agreement:
If any part of this Contract becomes invalid or ineffective
for any reason, the remaining parts of this Contract shall
continue to have effect and shall continue to be performed
by the Parties. At the same time the Parties shall take
effective rectifying measures to remedy the negative
consequences arising from such invalidity or
ineffectiveness.
75. Supersession:
This Contract shall be final and shall supersede any and all
other agreements, oral or written, previously entered into
between the Parties, unless otherwise provided for in this
Contract.
76. Amendment:
No amendment to this Contract shall be valid unless made in
writing and signed by both Parties.
77. Language Discrepancy:
This Contract is written in both Chinese and English and
both versions shall have equal force and effect. Should
there be any dispute on the interpretation of this Contract
or the two versions thereof, the Parties shall resort to
Chapter 17 for the solution.
78. Time is of the essence:
Time is of the essence of this Contract. The Party which
fails to perform its obligations in time shall be
responsible for the consequences arising therefrom.
79. Enurement:
This Contract shall be binding upon and shall enure to the
benefit of both Parties and each of their respective
successors and permitted assigns.
IN WITNESS WHEREOF Party A and Party B have executed this
Contract.
HEILONGJIANG GEOLOGICAL AND MINING TECHNOLOGY
DEVELOPMENT CORP.
By its authorized signatory(ies):
SEAL
//ss Signed by ▇▇▇, ▇▇▇▇▇▇
▇▇-▇▇▇▇ RESOURCES CORP.
By its authorized signatory(ies):
//ss Signed by ▇▇▇▇▇ ▇▇▇▇▇▇
Dated: September 9, 1997