SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
------------------------------
Date of Report (Date of earliest event reported): March 3, 2000
CHINA RESOURCES DEVELOPMENT, INC.
(Exact Name of Registrant as Specified in Charter)
Nevada 33-5628-NY 87-0263643
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
Room 2005, 20/F., Universal Trade Centre
3-5A Arbuthnot Road
Central, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code:
011-852-2810-7205
(Former name or former address, if changed since last report.)
<PAGE>
Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
The Board of Directors of the Registrant, at a special meeting held on
March 3, 2000, voted to approve a corporate restructuring of its 61%-owned
operating subsidiary, Hainan Zhongwei Agricultural Resources Company Limited
("HARC"), designed to cease the operations of its two primary businesses, the
marketing and distribution of natural rubber and liquid latex and the
procurement of production materials, supplies and other agricultural products.
Such actions were approved by unanimously by the board, and sufficient votes
were cast to approve the measure without considering the vote of Mr. Lin Yu
Quan, who announced his potential conflict of interest in the decision due to
his position as an officer of the General Bureau of Hainan State Farms of the
PRC (the "Farming Bureau").
On March 3, 2000, HARC and its three subsidiary companies, First Goods
And Materials Supply And Sales Corporation ("First Supply"), Second Goods And
Materials Supply And Sales Corporation ("Second Supply") and Rubber Sales Centre
("Sales Centre") entered into an Assets and Staff Transfer Agreement with the
Farming Bureau, which owns a 39% interest in HARC, by which the Farming Bureau
purchased assets and assumed liabilities and staff related to the ceased
businesses, effective as of January 1, 2000. The purchase price was the book
value or the fair value of the net assets transferred, determined as of December
31, 1999, whichever is the lower. A certified English translation of the Chinese
agreement is filed with this report as an exhibit.
Also, on March 3, 2000, the Registrant, the Farming Bureau and Billion
Luck Company Ltd. ("Billion Luck"), a wholly-owned subsidiary of the Registrant,
entered into a Shareholders' Agreement on Business Restructuring whereby they,
as the shareholders of HARC, approved the cessation of operations of First
Supply, Second Supply and Sales Centre and the transfer of assets, liabilities
and staff related thereto to the Farming Bureau, effective as of January 1,
2000. A certified English translation of the Chinese agreement is filed with
this report as an exhibit.
In the view of management, the performance of HARC's natural rubber
distribution business and the materials and supplies procurement business has
been unsatisfactory for some time, with substantial reported losses following
the occurrence of the Asian financial crisis. Management estimates that the poor
operating environment of these businesses will persist for the foreseeable
future. The Registrant's Board of Directors, in approving the corporate
restructuring, determined that it was in the best interest of the Registrant to
cease the operations of these two businesses. Such action is expected to reduce
selling and administrative expenses and improve operating and management
efficiency as non-profitable assets are sold, allowing management to focus on
exploring other investment opportunities.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
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Item 5. Other Events.
Not applicable.
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following exhibits are filed with this report:
Exhibit No. Exhibit Description
----------- -------------------
10.23 Assets and Staff Transfer Agreement among the Farming
Bureau, HARC, First Supply, Second Supply and Sales
Centre dated March 3, 2000 (Certified English
translation of original Chinese version filed
herewith.)
10.24 Shareholders' Agreement on Business Restructuring
among the Farming Bureau, the Registrant and Billion
Luck dated March 3, 2000 (Certified English
translation of original Chinese version filed
herewith.)
99.1 Press Release issued by Registrant dated March 10,
2000 (Filed herewith.)
Item 8. Change in Fiscal Year.
Not applicable.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CHINA RESOURCES DEVELOPMENT, INC.
March 18, 2000 By: /s/ Ching Lung Po
-------------------------------------
Name: Ching Lung Po
----------------------------------
Title: Chairman
----------------------------------
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<TABLE>
<CAPTION>
EXHIBITS INDEX
Exhibit No. Exhibit Description
----------- -------------------
<S> <C> <C>
10.23 Assets and Staff Transfer Agreement among the Farming Bureau,
HARC, First Supply, Second Supply and Sales Centre dated
March 3, 2000 (Certified English translation of
original Chinese version filed herewith.)
10.24 Shareholders' Agreement on Business Restructuring among the
Farming Bureau, the Registrant and Billion Luck dated March 3,
2000 (Certified English translation of original Chinese version filed
herewith.)
99.1 Press Release issued by Registrant, dated March 10, 2000 (Filed
herewith.)
</TABLE>
Assets and Staff Transfer Agreement among the Farming
Bureau, HARC, First Supply, Second Supply and Sales
Centre dated March 3, 2000
The undersigned officer of China Resources Development, Inc., hereby represents
that the following is a fair and accurate English translation of the original
Chinese version of the Assets and Staff Transfer Agreement among the Farming
Bureau, HARC, First Supply, Second Supply and Sales Centre dated March 3, 2000.
/s/ Wong Wah On
---------------
Wong Wah On
Secretary and Financial Controller
<PAGE>
ASSETS AND STAFF TRANSFER AGREEMENT
Hainan Zhongwei Agricultural Resources Co. Ltd. ("Party B") was
incorporated on June 28, 1994. First Goods And Materials Supply And Sales
Corporation ("Party C"), Second Goods And Materials Supply And Sales Corporation
("Party D") and Rubber Sales Centre ("Party E") are the wholly owned
subsidiaries of Party B. The General Bureau of Hainan State Farms ("Party A") is
one of the shareholders of Party B.
WHEREAS, Party C, Party D and Party E desire to transfer their assets,
liabilities and staff to Party A.
NOW, THEREFORE, in consideration of mutual agreements, all parties
agree as follows.
The headings used in this Agreement are given for convenience only and
shall not affect the interpretation of this Agreement.
Unless otherwise specified, the followings shall be referred as:
"Effective Date" are to the meaning of the provision under Article 8 of
this Agreement.
"Base Date" are to December 31, 1999.
"Accounting Standard of PRC" are to the accounting standard, rules and
regulations as adopted in the People's Republic of China.
"Net Assets Value Transfer" are to the meaning of the provision under
Article 1.4 of this Agreement.
"Transferors" are to Party B, Party C, Party D and Party E, collectively.
"Assets" are to all assets, rights, contracts, etc., which are transferred
by the Transferors to Party A. The details of which are listed out in the
Exhibit - Statement of Assets and Liabilities.
"Liabilities" are to all the liabilities, which are transferred by the
Transferors to Party A. The details of which are listed out in the Exhibit -
Statement of Assets and Liabilities.
"Statement of Assets and Liabilities" are to the contents as shown in the
Exhibit.
"This Agreement" are to all provisions of this Agreement and its Exhibits.
"Party A" are to Party A, including its wholly owned subsidiaries,
branches, divisions, and other legal entities.
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"Records" are to the files, records, information, technical know-how or
other information with business values which relate to the assets transferred.
"Transferred Staff" are to the redundant staff of the Transferors who are
employed by Party A.
"Cash and Bank Balances" are to cash and bank balances included in Exhibit
- - Statement of Assets and Liabilities.
"Accounts Receivable" are to accounts receivable included in the Exhibit -
Statement of Assets and Liabilities.
"Accounts Payable" are to accounts payable included in the Exhibit -
Statement of Assets and Liabilities.
"Other Receivables" are to other receivables and prepayments included in
the Exhibit - Statement of Assets and Liabilities, including but not limit to
purchase deposits paid.
"Other Payables" are to other payables and accrued expenses included in the
Exhibit - Statement of Assets and Liabilities, including but not limit to other
payables, accrued staff welfare expenses and taxes payable.
"Long-term Investments" are to the long-term investments included in the
Exhibit - Statement of Assets and Liabilities.
"Fixed Assets" are to fixed assets included in the Exhibit - Statement of
Assets and Liabilities.
"Inventories" are to inventories included in the Exhibit - Statement of
Assets and Liabilities.
"Contracts" are to all written and verbal contracts transferred to Party A,
including the contracts between the Transferors and the Transferred Staff.
"Responsibilities and Obligations" are to all contractual and legal
responsibilities and obligations with respect to the assets, liabilities and
staff transferred to Party A.
"Shareholders' Agreement on Business Restructuring" are to the
shareholders' agreement on business restructuring entered into by Party A, China
Resources Development, Inc. and Billion Luck Company Limited.
1 Transfer of Assets and Liabilities
1.1 According to the provisions of this Agreement, the parties to this
Agreement shall fulfill their respective obligations. The Transferors
shall transfer the Assets and Liabilities as shown in Statement of Assets
and Liabilities to Party A as of the Effective Date. Party A shall
thereafter assumes the rewards of ownership of the Assets and bears the
Liabilities, Responsibilities and Obligations associated with the
transfer of Assets.
2
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1.2 Except for the Liabilities, Responsibilities and Obligations that are
directly corresponded to the Assets transferred, Party A shall not be
responsible for any other liabilities, responsibilities and obligations
that shall be borne by the Transferors.
1.3 The transfer methods for all Assets and Liabilities shall comply with
the legal procedures.
1.4 The transfer price of the net assets shall be based on the book value
or fair value of net assets transferred as of the Base Date, whichever
is the lower. Those fair values shall be determined by an independent
valuer jointly employed by the parties to this Agreement.
1.5 Party A shall be responsible for the recovery of all Accounts Receivable.
The Transferors shall provide all necessary assistance and records for
the collection of Accounts Receivable on the condition that all costs and
expenses incurred thereon by the Transferors shall be borne by Party A.
1.6 Except for the contents which have already been disclosed to Party A, the
Transferors shall be responsible for all losses and expenses arising from
any disputes on the assets right with any third parties if the disputes
relate to the events that have already existed before the Base Date and
Party A shall not be responsible for. Any such losses incurred by Party A
thereon shall be compensated by the Transferors. If the disputes arising
from the events that occur after the Base Date and the Transferors shall
not be responsible for, Party A shall bear all expenses and losses
incurred thereon.
1.7 Except for the contents which have already been disclosed to Party A, the
Transferors shall bear all expenses and losses arising from claims of any
mortgages or rights of lien on the transferred assets by any third
parties if these mortgages or rights of lien have already existed before
the Base Date and the Party A shall not be responsible for. Any expenses
and losses incurred by Party A thereon shall also be compensated by the
Transferors. If the mortgages or rights of lien on the transferred assets
are created after the Base Date and the Transferors shall not be
responsible for, Party A shall bear all the expenses and losses incurred
thereon.
1.8 The Transferors shall not warrant the quality of any tangible assets
transferred, including but not limit to, Fixed assets, Inventories, etc.
For those items which are specifically requested by Party A not to be
bound by this provision before this Agreement becomes effective, they
shall be handled separately by all parties to this Agreement.
1.9 Any losses or consequences resulting from litigation or government
actions in relation to the Assets and Liabilities transferred shall be
borne by Party A if the results of such litigation and government actions
are not yet finalized before the Base Date. For those items which are
specifically requested by Party A not to be bound by this provision
before this Agreement becomes effective, they shall be handled separately
by all parties to this Agreement.
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1.10 Notwithstanding other provisions in this Agreement, the amounts due by
Party A's subsidiary farms and related companies to the Transferors shall
be taken over by Party A. Any amounts received from Party A's subsidiary
farms and related companies in relation to the above loans by the
Transferors after the Base Date shall belong to Party A. The above loans
shall be used to set off the amounts due by the Transferors to Party A or
shall be settled in cash when the loans are taken over by Party A.
1.11 Party A represents and warrants that it clearly understands and has
assessed the conditions and risks associated with the Assets and
Liabilities transferred by the Transferors. Party A also warrants that it
shall bear all the rights, returns, risks and obligations associated with
the transfer after the Base Date. After the Base Date, Party A shall not
tender any claims and requests to the Transferors, on the grounds that
there is any changes in the conditions or risks on the transferred Assets
or Liabilities, or on any matters in relation to the Obligations and
Responsibilities associated with the transferred Assets and Liabilities.
2 Payment
2.1 Except for that provided for in Article 1.10 of this Agreement, Party A
shall pay to the Transferors the Net Assets Fair Value in cash or
deduct the balances owed by Party B to Party A and its subsidiary farms
by the Net Assets Fair Value. In the event that the transfer represents
net liabilities balance, the net liabilities balance shall set off the
balance due by Party A to the Transferors.
2.2 If the transfer represents net assets balance, Party A shall pay the Net
Assets Fair Value to a designated account of the Transferors as
instructed by the Transferors
2.3 The payment shall be made within 120 days from the date of signing of
this Agreement.
2.4 Except for the Obligations and Responsibilities associated with the
transfer pursuant to this Agreement, Party A shall not bear any other
responsibilities and obligations which shall be borne by the Transferors.
As soon as this Agreement becomes effective, the Transferors shall not
bear liabilities, responsibilities and obligations transferred to Party A
in accordance with this Agreement.
2.5 Any other payments which are required to be paid under the provisions of
this Agreement shall be made within 30 days from the date of receiving
the notice from the receiving party.
3 Transfer of Staff
4
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3.1 All the staff of the Transferors who are redundant under this Agreement
shall be re-employed by Party A. But Transferors and Party A shall take
other appropriate procedures by mutual agreement to deal with those staff
whom Party A is not willing to employ
3.2 The Transferors shall terminate the employment relationships with the
Transferred Staff in accordance with the contract terms and in compliance
with all the legal requirements. The Transferors and Party A shall take
all reasonable steps in obtaining the acceptance from the Transferred
Staff. Party A shall employ the Transferred Staff on reasonable terms of
which the remuneration shall not be less than that of the existing staff
of Party A with comparable position and qualification.
3.3 In the event that any Transferred Staff are not willing to terminate the
employment relationship with the Transferors and the Transferors are
unable to terminate the employment contracts singly as of the Effective
Date, the Transferors shall continue to employ those staff until the
contracts can be terminated legally. Except for that provided for in
Article 3.1, Party A shall warrant to employed the aforementioned staff
within one year from the Effective Date.
3.4 The insurance contracts of the Transferred Staff shall also be
transferred to Party A at the same time when the Transferred Staff are
employed by Party A.
3.5 After the transfer of staff, Party A shall agree to let the Transferred
Staff to carry on any necessary hand-over work and to provide reasonable
working schedules for those staff to perform such work.
3.6 Party A shall reimburse the Transferors of any redundancy payments that
are required to be paid by the Transferors to the Transferred Staff in
accordance with the legal requirements and employment contract terms.
4 Transfer of Contracts
4.1 Except for the agreements shown in Article 4.5 of this Agreement, the
Transferors shall transfer the Contracts associated with the transferred
Assets and Liabilities to Party A.
4.2 The Transferors shall take all the reasonable steps to obtain the
confirmation from the third parties in respect to the transferred
Contracts. If the above confirmation are not obtained on or before the
Effective Date, the Transferors shall agree to cooperate with Party A for
the purpose of obtaining the above confirmation and to make any necessary
arrangements for the fulfillment of the Contracts by Party A. If the
above confirmation and arrangements are unable to obtain, the Transferors
shall fulfill the Contracts in accordance with the instructions of Party
A. All rights and responsibilities shall belong to Party A.
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4.3 As soon as this Agreement becomes effective, the Transferors' rights and
obligations on the Contracts shall terminate as of the Base Date, no
matter whether the legal procedures for the transfer of Contracts from
the Transferors to Party A have been completed or not. After the Base
Date, all the rights and obligations arising from the actions taken by
the Transferors for the fulfillment of the Contracts shall belong to
Party A.
4.4 The Transferors shall have the obligations to provide the conditions to
Party A for the fulfillment of the Contracts. However, the Transferors
shall not oblige to compensate Party A for any losses incurred by Party A
resulting from the fulfillment of the Contracts. For those Contracts
which are specifically requested by Party A not to be bound by this
provision before this Agreement becomes effective, they shall be handled
separately by the respective parties.
4.5 Long Term Sale and Purchase Agreement, Long Term Sale and Purchase
Supplementary Agreement No. 1, Long Term Sale and Purchase Supplementary
Agreement No. 2 and Long Term Sale and Purchase Supplementary Agreement
No.3 entered into among Party A, Party B, Party C and Party D on November
5, 1994, March 30, 1995, December 31, 1996 and May 21, 1999,
respectively, shall terminate from the Effective Date.
5 Records
5.1 The Transferors shall transfer all the relevant information and records
in relation to the Assets and Liabilities to Party A.
5.2 The Records transferred shall limit to those which are kept by the
Transferors as of the Effective Date. The Transferors shall not warrant
or compensate for the incompleteness and incorrectness of the Records
transferred, but shall give reasonable assistance on their rectification
if requested by Party A. All the costs incurred by the Transferors
thereon shall be borne by Party A.
5.3 For the purpose of maintaining the continuation of the Transferors'
business operations, the Transferors shall be allowed to retain the
duplicates of certain Record; however, the Transferors shall inform Party
A the details of the aforementioned duplicates retained if requested by
Party A.
5.4 The parties shall cooperate to make any necessary changes on the records
for the fulfillment of the transfer of rights of ownership of Assets and
Liabilities in accordance with the legal requirements.
6 Taxes and Charges
6.1 For the taxes and government charges in relation to the holding or usage
of the assets, the Transferors shall borne those amounts which are
accounted for before
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the Base Date in accordance with the Accounting Standard of PRC; whereas
Party A shall borne those amounts which are accounted for after the Base
Date.
6.2 Any taxes and government charges incurred for the fulfillment of this
Agreement shall be borne by the respective parties in accordance with the
legal requirements. All other expenses shall be shared between the
Transferors and Party A on a reasonable basis.
7 Insurance
7.1 The beneficiary of all insurance contracts in relation to the Assets
transferred purchased by the Transferors shall be changed to Party A. Any
insurance compensation received by the Transferors before the completion
of the transfer process shall be re-paid to Party A.
7.2 Party A shall be responsible to inform the insurance companies of the
changes and to perform the changing procedures. The Transferors shall
provide any necessary assistance and cooperation.
7.3 For the insurance premium which has already been paid by the Transferors,
the Transferors shall borne those amounts which are accounted for before
the Base Date in accordance with the Accounting Standard of PRC; whereas
Party A shall borne those amounts which are accounted for after the Base
Date.
8 Effective Date
This Agreement shall become effective and binding on all parties on
January 1, 2000.
9 Transferors' Warranties Before the Effective Date
Unless provided in this Agreement otherwise, the Transferors shall
warrant to perform the following before this Agreement becomes effective:
(1) If this Agreement becomes effective within 6 months from the Base
Date, the Transferors shall warrant to run the business with
reasonable benefit to the Assets and Liabilities between the Base
Date and the Effective Date.
(2) If this Agreement becomes effective within 6 months from the Base
Date, the Transferors shall warrant not to use the Assets for
pledges which fall outside the normal course of business between
the Base Date and the Effective Date.
(3) As requested by Party A, the Transferors shall allow the
designated staff of Party A to inspect the Transferors' accounting
records and operation information for the sake of protecting Party
A's interests.
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10 Conditions
10.1 As of the Effective Date of this Agreement, the Transferors shall present
the following documents to party A:
(1) This Agreement shall be signed by the Annual Meeting of
Shareholders, Board of Directors or other authorized persons and
accompanied with the duplicates of all necessary and signed
documents or resolutions in order to make this Agreement
effective, in accordance with the Transferors' Articles of
Associations and the legal requirements.
(2) The duplicates of other documents, certificates or approval
letters as are required in accordance with laws and the
requirements of the relevant government authorities.
10.2 As of the Effective Date of this Agreement, Party A shall present the
following documents to the Transferors:
(1) This Agreement shall be signed by the Annual Meeting of
Shareholders, Board of Directors or other authorized persons and
accompanied with the duplicates of all necessary and signed
documents or resolutions in order to make this Agreement
effective, in accordance with Party A's Articles of Associations
and the legal requirements.
(2) The duplicates of other documents, certificates or approval
letters as are required in accordance with laws and the
requirements of the relevant government authorities.
11 All Parties' Warranties After the Effective Date
11.1 All parties shall cooperate to notify the third parties in relation to
the Assets and Liabilities transferred and to make all necessary
arrangements in obtaining their confirmation of the transfer.
11.2 All parties shall cooperate and be responsible to ensure the staff be
transferred successfully without causing any losses to the Transferred
Staff in the course of transfer.
11.3 The Transferors shall sign all necessary documents as requested by Party
A, agree and take reasonable actions to assist Party A to develop its
business with the Assets and Liabilities.
11.4 The Transferors shall not sign any agreements, make any written or verbal
contracts, or take any actions in relation to the Assets and Liabilities
transferred without the consent of Party A.
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11.5 Any actions taken by Party A or any agreements signed by Party A with
respect to the Assets and Liabilities shall not impair the Transferors'
interests. In addition, Party A shall notify the Transferors promptly
when Party A intends to take any actions or sign any agreements which may
involve the Transferors. Party A shall accept any actions or advice
reasonably taken or raised by the Transferors.
11.6 After the Effective Date, the Transferors shall continue to conduct any
kinds of business with the customers with respect to the Assets and
Liabilities transferred and Party A shall not tender its objection.
12 The Transferors' Representations and Warranties
12.1 The Transferors are legally incorporated and existed persons and have the
authority to conduct businesses, to owe debts, to sign contracts and to
have complete civil capability.
12.2 This transfer is executed within the legal scope of businesses of the
Transferors.
12.3 The Agreement is signed by the legally authorized person of the
Transferors.
12.4 The Transferors have made reasonable efforts in providing Party A the
information and messages in relation to the Assets and Liabilities
transferred to Party A in appropriate means.
13 Party A's Representations and Warranties
13.1 Party A is legally incorporated and existed person and has the authority
to conduct businesses, to owe debts, to sign contracts and to have
complete civil capability.
13.2 This transfer is executed within the legal scope of businesses of
Party A.
13.3 The Agreement is signed by the legally authorized person of Party A.
14 Compensations
14.1 According to this Section, the Transferors shall compensate Party A for
any losses arising from the following events, including but not limit to,
direct economic losses, compensation to third parties, and the respective
legal fees and litigation costs:
(1) Any faulty acts of the Transferors after the Effective Date;
(2) The Transferors' failure to comply with the provisions, warranties
and representations of this Agreement.
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14.2 According to this Section, Party A shall compensate the Transferors for
any losses arising from the following events, including but not limit to,
direct economic losses, compensation to third parties, and the respective
legal fees and litigation costs:
(1) Any faulty acts of Party A after the Effective Date;
(2) Party A's failure to comply with the provisions, warranties and
representation of this Agreement.
14.3 If any aforementioned events in 14.1 and 14.2 occurs which results in
third parties' litigation action or claims against any party of this
Agreement, that party shall immediately notify the other party which it
considers shall be responsible for, so as to allow it to take its part
and to defense itself.
14.4 The party who receives the compensation shall pay efforts to minimize its
losses incurred and shall assist the party who pays the compensation in
exercising the right to claim other third parties of this Agreement to
recover the compensation.
15 Non-responsible for Disclosure
If any party to this Agreement disclose to other parties any matters
which is not in compliance with the provisions of this Agreement before
the Effective Date, the former shall not be responsible to pay the
compensation if the latter does not present its written request to the
former for ratification before the Effective Date.
16 Confidentiality
In the process of executing this transaction, all parties to this
Agreement shall not disclose any information to other third parties
unless the information is disclosed in compliance with the legal
requirements.
17 Other Provisions
17.1 All rights and obligations of this Agreement are not transferable.
17.2 The notices as required by this Agreement shall be made in the means of
ordinary mail, facsimile or direct delivery. Respective party's mailing
address and facsimile number shall be those used for ordinary business
operation. The notice is deemed receivable after 3 days from the day of
issue.
17.3 The provisions of this Agreement overrule other contradictory provisions
of any other contracts or agreements entered among the parties to this
Agreement.
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17.4 The invalidity or non-executable of any provisions of this Agreement
shall not make the other provisions invalid, unless the respective
parties are unable to rectify it in similar results so as to make this
Agreement becomes unfair.
17.5 The Chinese version of this Agreement is the only valid version.
17.6 This Agreement is signed on March 3, 2000.
Party A : General Bureau of Hainan State Farms
/s/ Lin Yu Quan
- -------------------------------------
By: Lin Yu Quan, Director
Party B : Hainan Zhongwei Agricultural
Resources Company Ltd.
/s/ Li Fei Lie
- -------------------------------------
By: Li Fei Lie, President
Party C : First Goods And Materials
Supply And Sales Corporation
/s/ Huang Liang Ping
- -------------------------------------
By: Huang Liang Ping, General Manager
Party D : Second Goods And Materials
Supply And Sales Corporation
/s/ Zhou De Cheng
- -------------------------------------
By: Zhou De Cheng, General Manager
Party E : Rubber Sales Centre
/s/ Lin Han
- -------------------------------------
By: Lin Han, General Manager
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EXHIBIT TO THE ASSETS AND STAFF TRANSFER AGREEMENT
STATEMENT OF ASSETS AND LIABILITIES
Description Amount
- ----------- ------
(In Renminbi Thousands)
ASSETS TRANSFERRED
- ------------------
<S> <C>
Cash and bank balances 7,050
Accounts receivable 3,619
Accounts receivable - related companies 92,260
Other receivables and prepayments 1,360
Inventories 6,414
Fixed assets 1,547
Long term investments 928
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TOTAL ASSETS TRANSFERRED 113,178
=======
LIABILITIES TRANSFERRED
- -----------------------
Accounts payable 14,957
Accounts payable - related companies 4
Other payables and accrued expenses 27,690
-------
TOTAL LIABILITIES TRANSFERRED 42,651
=======
NET ASSETS TRANSFERRED 70,527
=======
</TABLE>
Shareholders' Agreement on Business Restructuring
among the Farming Bureau, the Registrant and Billion
Luck dated March 3, 2000
The undersigned officer of China Resources Development, Inc., hereby represents
that the following is a fair and accurate English translation of the original
Chinese version of the Shareholders' Agreement on Business Restructuring among
the Farming Bureau, the Registrant and Billion Luck dated March 3, 2000.
/s/ Wong Wah On
---------------
Wong Wah On
Secretary and Financial Controller
<PAGE>
SHAREHOLDERS' AGREEMENT ON BUSINESS RESTRUCTURING
Parties involved:
General Bureau of Hainan State Farms (the "Farming Bureau")
Address: Nongken Street, Xiuying Caobo, Haikou City, Hainan Province, People's
Republic of China.
China Resources Development, Inc., ("CRDI")
Address: Room 2005, Universal Trade Centre, 3-5A Arbuthnot Road, Central,
Hong Kong.
Billion Luck Company Ltd. ("Billion Luck")
Address: The Cregue Buildings, P.O. Box 116, Road Town, Tortola, British
Virgin Islands.
WHEREAS, Hainan Zhongwei Agricultural Resources Co. Ltd. ("HARC") was
incorporated on June 28, 1994. The parties to this Agreement represent all
shareholders of HARC. Farming Bureau owns 39% shares of HARC, CRDI owns 5%
shares of HARC and Billion Luck owns 56% shares of HARC.
WHEREAS, the principal businesses of HARC, which are the distribution
of natural rubber and procurement of materials and supplies, have been carried
out through its wholly-owned subsidiaries, First Supply, Second Supply and Sales
Centre, since its incorporation. All parties agree that the performance of
distribution of natural rubber and procurement of materials and supplies
businesses was not satisfactory with reported losses following the occurrence of
Asian financial crisis. It is estimated that the operating environment of the
above businesses persists in the foreseeable future. Accordingly, it is in the
shareholders' interest to cease the operation of these businesses with
unsatisfactory prospect. Any assets that become excessive after the cessation of
businesses shall be sold. HARC desires to transfer the assets and the
corresponding liabilities of First Supply, Second Supply and Sales Centre to
Farming Bureau. Farming Bureau, HARC, First Supply, Second Supply and Sales
Centre shall enter into a separate "Assets and Staff Transfer Agreement" in
accordance with the provisions of this Agreement.
WHEREAS, the purpose of the restructuring is to abandon businesses with
operating losses and shift the funds to those businesses with stable and good
return in order to improve the overall operating efficiency.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
The headings used in this Agreement are given for convenience only and shall not
affect the interpretation of this Agreement.
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Unless otherwise specified, the followings shall be referred as:
"Effective Date" are to the meaning of the provisions under Article 9 of
this Agreement.
"Base Date" are to December 31, 1999.
"Accounting Standard of PRC" are to the accounting standard, rules and
regulations as adopted in the People's Republic of China.
"Net Assets Value Transferred" are to the meaning of the provision under
Article 1.4 of Assets and Staff Transfer Agreement.
"First Supply" are to First Goods And Materials Supply And Sales
Corporation.
"Second Supply" are to Second Goods And Materials Supply And Sales
Corporation.
"Sales Centre" are to Rubber Sales Centre.
"Transferors" are to HARC, First Supply, Second Supply and Sales Centre,
collectively.
"Assets" are to all assets, rights, contracts, etc., which are transferred
by the Transferors to Farming Bureau. The details of which are listed out in
"Statement of Assets and Liabilities" as appended in the Assets and Staff
Transfer Agreement.
"Liabilities" are to all liabilities, which are transferred by the
Transferors to Farming Bureau. The details of which are listed out in "Statement
of Assets and Liabilities" as appended in the Assets and Staff Transfer
Agreement.
"Assets and Staff Transfer Agreement" are to agreement that is signed by
HARC, First Supply, Second Supply, Sales Centre and Farming Bureau (see Exhibit
1).
"Statement of Assets and Liabilities" represents the contents shown in the
Exhibit to the Assets and Staff Transfer Agreement.
"This Agreement" are to all provisions in this Agreement and its Exhibits.
"Farming Bureau" are to General Bureau of Hainan State Farms, including its
wholly owned subsidiaries, branches, divisions and other legal entities.
"Records" are to the files, records, information, technical know-how or
other information with business values which relate to the assets and
liabilities transferred.
"Transferred Staff" are to the redundant staff of the Transferors who are
employed by Farming Bureau.
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"Cash and Bank Balances" are to cash and bank balances included in the
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement.
"Accounts Receivable" are to accounts receivable included in the Statement
of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement.
"Accounts Payable" are to accounts payable included in Statement of Assets
and Liabilities as appended in the Assets and Staff Transfer Agreement.
"Other Receivables" are to other receivables and prepayments included in
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement, including but not limit to purchase deposits paid.
"Other Payables" are to other payables and accrued expenses included in the
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement, including but not limit to other payables, accrued staff welfare
expenses and taxes payable.
"Long-Term Investments" are to long-term investments included in the
Statement of Assets and Liabilities as appended in the Assets and Staff Transfer
Agreement.
"Fixed Assets" are to fixed assets included in the Statement of Assets and
Liabilities as appended in the Assets and Staff Transfer Agreement.
"Inventories" are to inventories included in the Statement of Assets and
Liabilities as appended in the Assets and Staff Transfer Agreement.
"Contracts" are to all written and verbal contracts transferred to Farming
Bureau, including the contracts between the Transferors and the Transferred
Staff.
"Responsibilities and Obligations" are to all contractual and legal
responsibilities and obligations with respect to the assets, liabilities and
staff transferred to Farming Bureau.
1 Organization Restructuring
1.1 First Supply, a subsidiary of HARC, all divisions of which, including
Finance Division, Rubber Division, Fuels and Chemical Division,
Production Materials Division, Automobiles Trading Division and
Transportation Division shall cease operation from the Effective Date.
1.2 Second Supply, a subsidiary of HARC, all divisions of which, including
Finance Division, Rubber Division, Fuels and Chemical Division,
Production Materials Division, Automobiles Trading Division and
Transportation Division shall cease operation from the Effective Date.
1.3 Sales Centre, a subsidiary of HARC, shall cease operation from the
Effective Date.
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1.4 The Investment Management Division of HARC shall be responsible to
allocate the funds to other businesses and to coordinate the
establishment of any new subsidiaries or joint ventures.
1.5 The Board of Directors and management team of HARC shall be responsible
for the following matters:
(1) to coordinate the transfer of assets and staff so that all
provisions of this Agreement can be executed successfully.
(2) to formulate and carry out a detail action plan for the
establishment of the aforementioned subsidiaries and joint venture
in Article 1.4.
(3) to amend and formulate the management system of HARC and its
subsidiaries.
(4) to adjust and consolidate the accounting records of HARC and its
subsidiaries.
(5) to appoint the executive management team of HARC and its
subsidiaries.
(6) amend and prepare the articles of associations of HARC and its
subsidiaries.
1.6 Any shareholders of HARC shall have the right to employ an independent
accountant to audit the adjusted accounting records.
2 Transfer of Staff
2.1 All existing staff of HARC shall continue to be employed but be
reallocated to new positions following the corporate restructuring
exercise.
2.2 All the staff of First Supply, Second Supply and Sales Centre who are
redundant under this Agreement shall be re-employed by Farming Bureau.
But HARC and Farming Bureau shall take other appropriate procedures by
mutual agreement to deal with those staff whom Farming Bureau is not
willing to employ.
2.3 HARC, First Supply, Second Supply and Sales Centre shall terminate the
employment relationships with the Transferred Staff in accordance with
the contract terms and in compliance with all the legal requirements. The
Transferors and Farming Bureau shall take all reasonable steps in
obtaining the acceptance from the Transferred Staff. The Farming Bureau
shall employ the Transferred Staff on reasonable terms of which the
remuneration shall not be less than that of the existing staff of Farming
Bureau with comparable position and qualification.
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2.4 The Farming Bureau shall assist to resolve any disputes arising in the
course of termination of employment relationship between the Transferred
Staff and HARC, First Supply, Second Supply or Sales Centre.
2.5 The insurance contracts of the Transferred Staff shall also be
transferred to Farming Bureau at the same time when the Transferred Staff
are employed by Farming Bureau.
2.6 The Farming Bureau shall reimburse the Transferors of any redundancy
payments that are required to be paid by the Transferors to the
Transferred Staff in accordance with the legal requirements and
employment contract terms.
3 Transfer of Assets and Liabilities
3.1 In the process of business restructuring, any assets that become
excessive after the cessation of businesses together with the respective
liabilities shall be transferred by HARC, First Supply, Second Supply and
Sales Centre to Farming Bureau. For this purpose, the parties involved
shall enter into a separate Assets and Staff Transfer Agreement. (shown
as an Exhibit). Details of the transferred assets are listed in the
Statement of Assets and Liabilities.
3.2 All parties to this Agreement shall take all legal procedures to ensure
that the Assets and Staff Transfer Agreement be signed by the Transferors
and Farming Bureau, and that all Assets and Liabilities shown in the
Statement of Assets and Liabilities, which is appended to the Assets and
Staff Transfer Agreement, be transferred to Farming Bureau.
3.3 Except for the Liabilities, Responsibilities and Obligations that are
directly corresponded to the Assets transferred, Farming Bureau shall not
be responsible for any other liabilities, responsibilities and
obligations that have already existed before the transfer and shall be
borne by the Transferors.
3.4 The transfer methods for all Assets and Liabilities shall comply with the
legal requirements governing the transfer procedures.
3.5 The Farming Bureau shall be responsible for the recovery of all Accounts
Receivable. The Transferors shall provide all necessary assistance and
records for the collection of Accounts Receivable on the condition that
all costs and expenses incurred thereon by the Transferors shall be borne
by the Farming Bureau.
3.6 Except for the contents which have already been disclosed to Farming
Bureau, the Transferors shall be responsible for all losses and expenses
arising from any disputes on the assets right with the third parties of
Assets and Staff Transferred
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Agreement if the disputes relate to the events that have already existed
before the Base Date and the Farming Bureau shall not be responsible for.
Any such losses incurred by Farming Bureau thereon shall be compensated
by the Transferors. If the disputes arising from the events that occur
after the Base Date and the Transferors shall not be responsible for, the
Farming Bureau shall bear all expenses and losses incurred thereon.
3.7 Except for the contents which have already been disclosed to Farming
Bureau, the Transferors shall bear all expenses and losses arising from
claims of any mortgages or rights of lien on the transferred assets by
the third parties of Assets and Staff Transferred Agreement if these
mortgages or rights of lien have already existed before the Base Date and
the Farming Bureau shall not be responsible for. Any expenses and losses
incurred by Farming Bureau thereon shall also be compensated by the
Transferors. If the mortgages or rights of lien on the transferred assets
are created after the Base Date and the Transferors shall not be
responsible for, the Farming Bureau shall bear all the expenses and
losses incurred thereon.
3.8 The Transferors shall not warrant the quality of any tangible assets
transferred, including but not limit to, Fixed Assets, Inventories, etc.
For those items which are specifically requested by the Farming Bureau
not to be bound by this provision before the Assets and Staff Transfer
Agreement becomes effective, they shall be handled separately by all
parties to Assets and Staff Transfer Agreement.
3.9 Any losses or consequences resulting from litigation or government
actions in relation to the Assets and Liabilities transferred shall be
borne by the Farming Bureau if the results of such litigation and
government actions are not yet finalized before the Base Date. For those
items which are specifically requested by the Farming Bureau not to be
bound by this provision before the Assets and Staff Transfer Agreement
becomes effective, they shall be handled separately by all parties to
Assets and Staff Transfer Agreement.
3.10 Notwithstanding other provisions in this Agreement, the amounts due by
the Farming Bureau's subsidiary farms and related companies to the
Transferors shall be taken over by the Farming Bureau. Any amounts
received from the Farming Bureau's subsidiary farms and related companies
in relation to the above loans by the Transferors after the Base Date
shall belong to the Farming Bureau. The above loans shall be used to set
off the amounts due by the Transferors to the Farming Bureau or shall be
settled in cash when the loans are taken over by the Farming Bureau.
3.11 The Farming Bureau represents and warrants that it clearly understands
and has assessed the conditions and risks associated with the Assets and
Liabilities transferred by the Transferors. Farming Bureau also warrants
that it shall bear all the rights, returns, risks and obligations
associated with the transferred assets and liabilities after the Base
Date. After the Base Date, the Farming Bureau shall not tender any claims
and requests to the Transferors, on the grounds that there is any changes
in the
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conditions or risks on the Assets or Liabilities, or on any matters in
relation to the Obligations and Responsibilities associated with the
Assets and Liabilities.
4 Payment
4.1 Except for that provided for in Article 3.10 of this Agreement, Farming
Bureau shall pay to the Transferors the Net Assets Fair Value in cash, or
deduct the balances owed by HARC to Farming Bureau and its subsidiary
farms by the Net Assets Fair Value. In the event that the transfer
represents net liabilities balance, the net liabilities balance shall set
off the balance due by the Farming Bureau to the Transferors.
4.2 If the transfer represents net assets balance, the Farming Bureau shall
pay the Net Assets Fair Value to a designated account of the Transferors
as instructed by the Transferors within 120 days from the date of signing
of the Assets and Staff Transfer Agreement.
5 Transfer of Contracts
5.1 The Transferors shall transfer the Contracts associated with the Assets
and Liabilities to Farming Bureau.
5.2 As soon as the Assets and Staff Transfer Agreement becomes effective, the
Transferors' rights and obligations on the Contracts shall terminate as
of the Base Date, no matter whether the legal procedures for the transfer
of contracts from the Transferors to the Farming Bureau have been
completed or not. After the Base Date, all the rights and obligations
arising from the actions taken by the Transferors for the fulfillment of
the Contracts shall belong to the Farming Bureau.
5.3 The Transferors shall have the obligations to provide the conditions to
the Farming Bureau for the fulfillment of the Contracts. However, the
Transferors shall not oblige to compensate Farming Bureau for any losses
incurred by Farming Bureau resulting from the fulfillment of the
Contracts. For those contracts which are specifically requested by the
Farming Bureau not to be bound by this provision before the Assets and
Staff Transfer Agreement becomes effective, they shall be handled
separately by the respective parties.
6 Records
6.1 The Transferors shall transfer all the relevant information and records
in relation to the Assets and Liabilities to the Farming Bureau.
6.2 The Records transferred shall limit to those which are kept by the
Transferors as of the Effective Date. The Transferors shall not warrant
or compensate for the incompleteness and incorrectness of the Records
transferred, but shall give reasonable assistance on their rectification
if requested by Farming Bureau. All the costs incurred by the Transferors
thereon shall be borne by Farming Bureau.
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7 Taxes and Charges
7.1 For the taxes and government charges in relation to the holding or usage
of the assets, the Transferors shall borne those amounts which are
accounted for before the Base Date in accordance with the Accounting
Standard of PRC; whereas the Farming Bureau shall borne those amounts
which are accounted for after the Base Date.
7.2 Any taxes and government charges arising from the transfer of assets
shall be borne by the respective parties in accordance with the legal
requirements. All other expenses shall be shared between the Transferors
and Farming Bureau on a reasonable basis.
8 Insurance
8.1 The beneficiary of all insurance contracts in relation to the assets
transferred purchased by the Transferors shall be changed to Farming
Bureau. Any insurance compensation received by the Transferors before the
completion of the transfer process shall be re-paid to Farming Bureau.
8.2 For the insurance premium which has already been paid by the Transferors,
the Transferors shall borne those amounts which are accounted for before
the Base Date in accordance with the Accounting Standard of PRC; whereas
the Farming Bureau shall borne those amounts which are accounted for
after the Base Date.
9 Effective Date
This Agreement shall become effective and binding on all parties on
January 1, 2000.
10 Conditions
10.1 As of the Effective Date of this Agreement, one party shall present to
the other parties the following documents:
(1) This Agreement shall be signed by the Annual Meeting of
Shareholders, Board of Directors or other authorized persons and
accompanied with the duplicates of all necessary and signed
documents or resolutions in order to make this Agreement
effective, in accordance with the Articles of Associations and the
legal requirements,
(2) The duplicates of other documents, certificates or approval
letters as are required in accordance with laws and the
requirements of the relevant government authorities.
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(3) Signed Assets and Staff Transfer Agreement.
11 Respective Parties' Representations and Warranties
11.1 All parties to this Agreement are legally incorporated and existed legal
persons and have the authority to conduct businesses, to owe debts
independently, to sign contracts and have complete civil capability.
11.2 This transfer is executed within the legal scope of businesses of
respective parties.
11.3 This Agreement is signed by the legally authorized persons of respective
parties.
12 Confidentiality
In the process of executing this transfer, all parties to this Agreement
shall not disclose any information to other third parties unless the
information is disclosed in compliance with the legal requirements.
13 Other Provisions
13.1 The provisions of this Agreement overrule other contradictory provisions
of any other contracts or agreements entered among the parties to this
Agreement
13.2 The Chinese version of this Agreement is the only valid version.
13.3 This Agreement is signed on March 3, 2000.
General Bureau of Hainan State Farms
/s/ Lin Yu Quan
- ------------------------------
By: Lin Yu Quan, Director
China Resources Development, Inc.
/s/ Tam Cheuk Ho
- ------------------------------
By: Tam Cheuk Ho, Director
Billion Luck Company Ltd.
/s/ Wong Wah On
- ------------------------------
By: Wong Wah On, Director
9
Press Release issued by Registrant, dated
March 10, 2000
<PAGE>
CONTACT
Edward Wong, Financial Controller
011-852-2810-7205 or [email protected]
FOR IMMEDIATE RELEASE
CHINA RESOURCES DEVELOPMENT, INC.
ANNOUNCES CORPORATE RESTRUCTURING
HONG KONG, March 10, 2000 - CHINA RESOURCES DEVELOPMENT, INC. (NASDAQ: CHRB), a
Nevada corporation based in the People's Republic of China (PRC), today
announced the completion of a corporate restructuring of its 61%-owned operating
subsidiary, Hainan Zhongwei Agricultural Resources Company Limited ("HARC"),
designed to cease the operations of its two primary businesses, the marketing
and distribution of natural rubber and liquid latex and the procurement of
production materials, supplies and other agricultural products.
On March 3, 2000, HARC entered into an agreement with the General Bureau of
Hainan State Farms of the PRC (the "Farming Bureau"), which owns a 39% interest
in HARC, by which the Farming Bureau purchased assets and assumed liabilities
related to the ceased businesses, effective as of January 1, 2000. The Company
will file a report on Form 8-K no later than March 18, 2000, to more fully
report the transaction with the Farming Bureau.
The performance of the natural rubber distribution business and the materials
and supplies procurement business has been unsatisfactory for some time, with
substantial reported losses following the occurrence of the Asian financial
crisis. It is estimated that the poor operating environment of these businesses
will persist for the foreseeable future. Accordingly, the Company's Board of
Director is of the opinion that it is in the best interest of the Company to
cease the operations of these two businesses.
The Company expects that this restructuring plan will:
o Reduce selling and administrative expenses as the two businesses are
ceased;
o Improve operating and management efficiency as non-profitable assets are
sold, allowing management to focus on exploring other investment
opportunities.
David Ching, the Chairman of the Board of China Resources Development, Inc.,
commented that "the Company faces extremely difficult market conditions for its
natural rubber distribution business and its procurement business, and losses
have been reported since 1998. The Company's management expects that the Company
will also report an operating loss for fiscal year 1999. It is therefore in the
Company's best interest to cease these businesses. Our management is actively
looking for other business opportunities in a prudent manner. We shall also look
at ways to improve the efficiency of the Company's existing operations."
Because of the complex auditing process that the Company's auditors (Ernst and
Young - Hong Kong) must undertake, which includes the conversion of the year's
financial results from Chinese accounting standards to U.S. GAAP (Generally
Accepted Accounting Principles), in addition to the necessity of
<PAGE>
preparing a comprehensive Form 10-K for filing with the Securities and Exchange
Commission, the Company expects that the entire legally allotted time for
reporting its results will be required.
China Resources Development, Inc., with offices in Hong Kong and the Hainan
Province of the PRC, through a subsidiary, has owned a 61% interest in HARC.
HARC has been engaged in the businesses of marketing and distributing dry,
natural rubber and liquid latex, and procuring production materials, supplies
and other agricultural products. The Hainan Province supplies approximately 60%
of the PRC's natural rubber production.
Except for the historical information in this press release, it includes
forward-looking statements that involve risks and uncertainties, including but
not limited to, the impact of weather, competitive pressures from within the
natural rubber industry, quarterly fluctuations in results, dividend income
receivable, the management of growth, market dynamics and other risks detailed
from time to time in the Company's Securities and Exchange Commission filings.
Although the Company's management believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct.
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