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: ▇.▇. ▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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 #65 Zhongshan Road,
Xiangfang District, Harbin.
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:
#▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Xiangfang District, Harbin,
Heilongjiang, China
(2) In the case of Party B:
#804, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
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 JIN, ▇▇▇▇▇▇
▇▇-▇▇▇▇ RESOURCES CORP.
By its authorized signatory(ies):
//ss Signed by ▇▇▇▇▇ ▇▇▇▇▇▇
Dated: September 9, 1997