[AVIC TECHNOLOGIES LETTERHEAD]
March 29, 1999
A. Chan & Associate Inc.
Suite 333, 1333-8th Street S.W.
Calgary, Alberta
T2R 1M6
Att: Mr. Alan Chan, P. Eng.
Dear Alan:
Thank you for the time & effort you spent in preparing your
quotation of March 19 & 25, 1999.
Please proceed with the work for the Fiberglass Window Frame
manufacturing equipment evaluation and Chinese Market survey work as per your
proposal & revised price of USD28,800.00 including all the traveling Expenses.
We would appreciate this work being completed as close to but
no later than July 31, 999.
Thank you once again for your promptness in returning this
proposal. We look forward to receiving your final report.
Very truly yours,
Annette Shaw
<PAGE>
[CHAN LETTERHEAD]
March 25, 1999
Avic Technologies Ltd.
445 Rue Saint Francois Xavier
Montreal, Quebec H2Y 2T1
Dear Sir and Madame:
Re: Fiberglass Window Frame Project in China - Proposal Dated
March 19, 1999
With reference to our earlier telephone conversations and the above referenced
proposal, this is to confirm our agreement that our company will not carry out
the work in assisting Avic Technologies in the project development in China as
described in section 2.3 in the above referenced proposal. With the revision,
our total fee has now revised to $28,800.00. The fee breakdown is shown below:
Professional fee (time): $25,000.00US
Travel and Other Expenses: $ 3,800.00US
Total: ____________
$28,800.00US
We trust that you will find our new fee satisfactory. If further information is
required, please do not hesitate to contact the undersigned. Once again, we
thank you very much for giving us an opportunity to submit a proposal.
Yours truly,
Alan Chan P. Ena.
President
<PAGE>
[CHAN LETTERHEAD]
March 19, 1999
Avic Technologies Ltd.
445 Rue Saint Francois Xavier
Montreal, Quebec H2Y 2T1
Dear Sir and Madame:
Re: Fiberglass Window Frame Project in China
We thank you very much for giving us an opportunity to submit a proposal for
carrying out a survey and evaluation on the fiberglass window frame pultruding
equipment for the above referenced project, a survey and evaluation of the
fiberglass window frame market in China, and for assisting in the project
development in China. Our scope of work is summarized in the attached proposal.
Our company has a substantial amount of experience in the building material
industry in China, and is very familiar in its regulations and policies in
dealing with Sino-Foreign joint ventures. In the past few years, we have spent a
substantial amount of time in China in developing joint ventures in the
construction industry.
Our total fee for the services as described in the attached proposal is
$38,800.00 US, which includes both time and expenses. We trust that you will
find the attached proposal satisfactory. If further information is required,
please do not hesitate to contact the undersigned.
Yours truly,
Alan Chan P. Ena.
<PAGE>
[CHAN LETTERHEAD]
Technical Services Proposal
Fiberglass Window Frame Project in China
1. The Project
The project is a Sino-Foreign joint venture between Avic Technologies
Ltd. of Montreal, Canada and a local Chinese party to establish a fiberglass
window frame manufacturing facility in Guangdong, China. The project will be
carried out in two phases. In the first phase, this project is to have one
production line and a second production line will be added in the second phase.
The Guangdong province is located in southern China just next to Hong
Kong. It is one of the most prosperous provinces in China and has the most
Sino-Foreign joint ventures. The Chinese government has been designated a first
special economic zone with preferential tax treatment in China in Guangdong. The
province of Guangdong has a population of approximately 70 millions.
2. Scope of Work
The scope of work included in this proposal is generally comprised of
carrying out a survey and evaluation of fiberglass window frame pultruding
equipment in China and North America, a survey and evaluation of the fiberglass
window market in the China, and providing assistance in the project development
in China.
2.1 Surveys and Evaluation of Fiberglass Window Frame Pultruding Equipment
In recent years, pultruded fiberglass has been experiencing more and
more acceptance in North American and around the world as a framing material in
the fenestration industry. The growth in fiberglass materials in the USA and
Canada is expected to grow at more than double the rate of growth of the
fenestration industry as a whole.
These characteristics make pultruded material attractive for use not
only as a single window framing material, but also in combination with other
traditional materials such as wood, PVC, and aluminum. These designs allow full
utilization of the specific advantages of various materials, resulting in
significant improved windows, which feature unique qualities that would be
impossible to obtain with a single material.
The strength of dimensional stability of pultruded fiberglass also
exhibits warp free material. Test has shown under identical loading conditions
the door with a pultruded core experiences about 80 percent less deflection than
a comparable solid wood door. With the technology available to make the complex
thin wall shapes required in window frames, pultruded material has many inherent
properties that make it desirable as a framing material.
Fiberglass pultruding machines had first appeared in the mid 1990's.
Presently, there are both domestic made and foreign made pultruding machines in
China. The foreign made machines are generally of higher quality and have a
higher production capacity.
In this part of the assignment, a survey of the availability and an
evaluation of the quality and cost of fiberglass window frame manufacturing
machine in both China and North America will be carried out. The work will
include, contacting various manufacturers in both China and North America,
<PAGE>
visiting some selected manufacturers, and evaluating the production capacity,
quality and cost of equipment available. A trip to China will be taken to carry
out these tasks.
A trip in North America will also be taken to visit North American
pultruding equipment manufacturers. Pultruding equipment from companies such as
Omniglass Ltd., Magnum Tech Machinery Inc. and Fiberflex Inc. will be evaluated.
2.2 Surveys and Evaluation of Fiberglass Window Frame Market in China
Fiberglass window frame is the latest product in the evolution of the
window frame industry in China. The Chinese government is currently promoting
its use because of its high insulation efficiency.
Due to the enforcement of the forestry conservation policy in many
areas in China, use of wooden windows is prohibited. The use of steel windows
has been gradually discontinued because of their poor functionality and poor
insulation level. Aluminum windows have also many .
Fiberglass window has been recently introduced in China. It is the
latest generation of window in China. In comparison to plastic steel window,
fiberglass window is stronger, has a lower expansion co-efficient, is heat
resistant and is easy to clean. It doesn't require steel reinforcement as
plastic window. Its cost is competitive to that of plastic steel window. It is
expected that the use of fiberglass window will grow rapidly in the future in
China as China introduces more and more stringent energy conservation
regulations. It recently introduced guidelines that require the reduction of
energy consumption of housing by up to 50% within the next few years.
In rural areas, wooden windows are still used. However, with the
economic development and the increase in wealth among the farmers, and with the
enforcement of forestry conservation policy, many rural areas have begun to use
more modern windows, such as plastic steel and fiberglass windows.
With a population of over 12 billion and a rapid growth in its building
industry, China has an enormous market for building products, particularly for
door and window frames. In the past ten years, there have been over 10 billion
square meters of completed building construction, consuming over 1.3 billion
square meters of door and window frames. In 1995, 1.2 billion square meters of
residential housing were completed in China, requiring over 180 million square
meters of door and window frames.
In 1996, the completed floor area of all types of construction in China
was approximately 1.625 billion square meters, of which about 750 million square
meters were for construction in the urban areas and about 875 million square
meters for construction in the rural areas. For the area completed,
approximately 1.225 billion square meters were for residential purposes.
Based on the current industry norm, about 0.20 square meter of window
would be required for every square meter of building and housing floor
completed. This implies that the total annual consumption of windows in China is
over of 300 million square meters. As a result, China has a huge market for
windows.
Besides requiring over 300 million square meters of windows for new
construction in China, there is also a growing demand of window in the
renovation market as more and more consumers wanting to renovate their homes. It
is estimated that the total window market for both new constructions and
renovations in China is over 500 million square meters. This means the demand
for window frame materials, which include wood, steel, aluminum, plastic and
<PAGE>
fiberglass windows. It is also expected that with its superior quality and
competitive pricing, fiberglass window will replace plastic window in the future
as the main window product in China.
In this part of the assignment, trip to China will be taken to survey
and evaluate the market. This will include contacting various institutes and
companies in the building material industry, obtaining relevant information for
this industry, and inspect various building sites.
2.3 Assistance in Project Development
Since the late 1970's, China started to allow foreign investors into
China by way of the establishment of Sino-Foreign joint ventures. Since then,
many joint ventures have been established in China. As it is common knowledge in
North America, developing joint venture in China is a rather complex and
challenging affair. The regulations and policies governing Sino-Foreign joint
ventures are constantly being changed by the Chinese government. In some of the
backward areas, even basic regulations and policies are even not being followed.
Doing business in China depends a lot of personal contact and relation. Our
company has spent the last few years in cultivating these relations with various
contacts in both the private and government sectors in China.
In assisting the development of this fiberglass window frame project in
China, our company will contact various authorities and institutes in the
building material industry to source potential partners and suitable location
for the joint venture. As well, we will do the necessary diligence in evaluating
the potential partner, the location proposed, and the competitions in the area.
In addition if required, we will assist the joint venture in obtaining the
necessary regulatory approvals and permits.
3. The company
A. Chan & Associates Inc. was established in the early 1990's with the
focus of seeking and developing opportunities in China's rapidly growing
construction and building material industries. The Company's principal and
associates are highly skilled and experienced professionals, some of which have
many years of experience in doing business in China. The team's working
experience in China dates back the late 1970's when China first adopted laws
allowing foreign investment. Through its established network of contacts the
Company
In carrying this assignment, the principal of our company will
personally dedicated a substantial amount of his time in carrying out tasks as
outlined in this proposal. This includes travel to China to survey and evaluate
the Chinese window frame market and the supply of pultruding equipment in China.
4. Fee
This fee for completing the scope of work as outlined in this proposal
is $38,800.00US, including time and expenses. It is expected that two trip will
be required. One is going to China and is to be taken within North America in
visiting equipment manufacturers. The breakdown of the fee is as follows:
Professional fee (time): $30,000.00US
Travel and other expenses: $ 8,800.00US
------------
Total: $38,800.00US
