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Cooperative Joint Venture Contract

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COOPERATIVE JOINT VENTURE CONTRACT


FOR


GUANGXI GUANGHE METALS. LTD.


AMONG


HECHI INDUSTRIAL CO. LTD.


AND


BIOGAN INTERNATIONAL INC.


JANUARY 27, 2000


CHAPTER I
GENERAL PROVISIONS


Pursuant to the Law of the People's Republic of China on Sino-Foreign Co-Operative Enterprises and other relevant Chinese laws and regulations, on the basis of the principles of equality and mutual benefit, HECHI INDUSTRIAL CO. LTD. a company organized and existing under the laws of the People's Republic of China (hereafter referred to as "PARTY A" ) and BIOGAN INTERNATIONAL INC. a limited liability company organized and existing under the laws of the State of Delaware of the United States of America (hereafter referred to as "PARTY B") agree, after friendly consultations, to jointly invest in and set up a co-operative joint venture in Guangxi Zhuang Autonomous Region of the People's Republic of China and hereby enter into this Contract.


ARTICLE 1


When used in this Contract, the following terms shall have the meanings set forth below:


"ARTICLES OF ASSOCIATION" shall mean the Articles of Association of the Cooperative Joint Venture Company, a copy of which is attached hereto as Annex A;


"FEASIBILITY STUDY REPORT" shall mean the feasibility study submitted to the Hechi Foreign Trade and Economic Co-operation Administration in connection with the application for approval of establishment of the Cooperative Joint Venture Company.


"PARTIES" shall collectively mean Party A and Party B;


"PARTY A" shall mean Hechi Industrial Co. Ltd;


"PARTY B" shall mean Biogan International Inc.


CHAPTER II
PARTIES TO THE JOINT VENTURE


ARTICLE 2


The Parties to this Contract are:


HECHI INDUSTRIAL CO. LTD.


Legal Address: No. 386, Xinjian Road, Hechi City, Guangxi, 547000
The People's Republic of China Legal Representative: Kuang Yihuai Title: Chairman Nationality: Chinese


BIOGAN INTERNATIONAL INC.


Legal Address: Potomac Drive, Boise Idaho, U.S.A. Legal Representative: Gilles Laverdier e Title: President Nationality: Canadian


CHAPTER III
ESTABLISHMENT OF THE COMPANY


ARTICLE 3


Pursuant to the Co-Operative Joint Venture Law and other relevant Chinese laws and regulations, the Parties hereto agree to establish the Cooperative Joint Venture Company as a limited liability co-operative enterprise for developing, manufacturing and selling the products of the Cooperative Joint Venture Company with advanced and applicable technology introduced by the both parties of the Cooperative Joint Venture Company.


ARTICLE 4


The name of the Cooperative Joint Venture Company shall be [Chinese characters] in Chinese, and "GUANGHE METALS CO. LTD." in English.


The legal address of the Cooperative Joint Venture Company shall be No. 386, Xinjian Road, Hechi, Guangxi, the People's Republic of China


ARTICLE 5


All activities of the Cooperative Joint Venture Company must comply with the published laws, decrees and pertinent rules and regulations of the People's Republic of China and shall be governed and protected by Chinese law.


ARTICLE 6


The liability of the Cooperative Joint Venture Company shall be limited to the registered capital of the Cooperative Joint Venture Company and that of the Parties to the Cooperative Joint Venture Company shall be limited to their respective subscriptions to the registered capital and no party shall have any liability to the Company or to any third party severally or jointly in excess of such amount.


CHAPTER IV
PURPOSE, SCOPE AND SCALE OF PRODUCTION AND OPERATION


ARTICLE 7


The purpose of the Parties in forming the Cooperative Joint Venture Company is to further strengthen economic and technological cooperation; to develop, manufacture and sell its products with advanced and applicable technology introduced by the both parties of the Cooperative Joint Venture Company. The


Cooperative Joint Venture Company shall also raise economic efficiency and use its best effort to export its products to bring satisfactory economic returns to the Parties by improving product quality, developing new products and achieving a competitive quality and price position in both domestic and overseas mining industry through the adoption of scientific management methods.


ARTICLE 8


The scope of operation of the Cooperative Joint Venture Company shall be:


(1) Exploration, selection, smelting and sales of mineral products and
by-products;


(2) Manufacturing and sales of metal materials and non-metal materials, raw
coal, coke, machinery and electronic equipment and chemical products;


(3) Delivery service by motor vehicle;


(4) Installation of water and electric equipment;


(5) Research, development and sales of hi-tech products; and


(6) Research, development and sales of medical products.


ARTICLE 9


As provided in the Feasibility Study Report, the scale of production of the Cooperative Joint Venture Company shall be in accordance with market demand and a projection of the initial annual demand for the products of the Cooperative Joint Venture Company.


The production capacity may be expanded during the term of the Contract with the development of market demand and other conditions. In the event that the Cooperative Joint Venture Company expands its production capacity and needs more capital, Party B shall be responsible to raise such capital for the Cooperative Joint Venture Company.


CHAPTER V
TOTAL INVESTMENT AND REGISTERED CAPITAL


ARTICLE 10


The total investment amount of the Cooperative Joint Venture Company shall be US$25,000,000.


ARTICLE 11


The total registered capital of the Cooperative Joint Venture Company shall be US$10,000,000, and shall be contributed by the Parties in the following proportions:


Party A: US$800,000


Party B: US$9,200,000


ARTICLE 12


The capital contributions of the Parties shall be contributed in accordance with the following:


Party A shall make its capital contribution in kind with those assets specified in the Appendix 1 to this Contract, of which US$800,000 shall be Party A's capital contribution, to the Cooperative Joint Venture Company in a lump sum after the Cooperative Joint Venture Company obtains its Business License from the Hechi Administration for Industry and Commerce.


Party B has remitted US$200,000 into the account designated by Party A. This amount will be transferred into the account of the Cooperative Joint Venture Company once the Cooperative Joint Venture Company obtains its Business License and opens an account in a bank in the People's Republic of China. Before or on 20th February, 2000, Party B shall remit US$300,000 into the account of the Cooperative Joint Venture Company. Within three (3) months of receipt of the Business License of the Cooperative Joint Venture Company, Party B shall remit US$1,500,000 into the account of the Cooperative Joint Venture Company. Within eighteen (18) months of the receipt of the Business License of the Cooperative Joint Venture Company, Party B shall remit US$7,200,000 into the account of the Cooperative Joint Venture Company. Or the Board of the Cooperative Joint Venture Company can resolve to adjust the amount of the registered capital of the Cooperative Joint Venture Company at an appropriate time.


ARTICLE 13


The contributions of the Parties shall be made in the following manner:


(a) Party A's Contribution: Party A shall make its capital contribution in
kind as specified in the Appendix 1 to this Contract to the JVC.


(b) Party B's Contribution: Party B shall contribute in United State
Currency US$9,000,000 and the remaining amount in the form of
intellectual property rights and trademark rights.


ARTICLE 14


The obligation of both Parties to make any contribution toward the registered capital of the Cooperative Joint Venture Company hereunder shall be subject to the following conditions:


all government approvals required for establishment of a joint venture with the scope of operation set forth under Article 8 above under law, regulation or administrative ruling in the People's Republic of China have been obtained for the establishment of the Cooperative Joint Venture Company.


ARTICLE 15


The Parties hereby make the following representations and warranties:


1. they are legally established in accordance with the laws specified in
the General Provisions of this Contract;


2. they have the authorities and capacities of executing this Contract and
perform the obligations stipulated herein;


3. the representatives who execute this Contract have received full
authorization based on a valid authorization letter. The copy of such
authorization has been provided to the other Party;


4. The execution of this Contract and performance of the obligations
herein will neither constitute nor cause to constitute violation to any
other contracts or commitments which the Parties to the Cooperative
Joint Venture Company is (are) a party to, and will not constitute or
cause to constitute any violation of any contracts or commitments
involving any of their assets or properties.


The above representatives and warranties shall be valid at the execution of this Contract and during the existence of the Cooperative Joint Venture Company.


ARTICLE 16


Subject to the approval of the Board of Directors, the Cooperative Joint Venture Company shall have the power to borrow any funds needed in addition to the registered capital and to mortgage its properties in relation thereto.


ARTICLE 17


No Party shall assign or otherwise dispose of all or part of its interest in the Cooperative Joint Venture Company to the other Party or a third party without first obtaining the prior approval of the other Party through a resolution of the Board of Directors and the approval of the original examination and approval authority.


However, any Party may freely assign its interest in the Cooperative Joint Venture Company to its own affiliate without first obtaining the consent of the other Party or giving the other Party a right of first refusal, but subject to the giving of a written notice to the Board of Directors for the record. An affiliate for the purpose of this Article means the parent company of the Party and said parent company's wholly owned subsidiaries and any company which is a wholly owned subsidiary of such Party. Such assignment shall be reported to the original examination and approval authority for approval.


Subject to the requirements of the first paragraph of this Article, a Party (the "SELLING PARTY" ) to this Contract may sell, transfer, assign, or otherwise dispose of the whole or any part of its interest in the Cooperative Joint Venture Company to a third party only after giving notice in wring (herein referred to as the "OFFER NOTICE" ) to the other Party to this Contract (the "NON-SELLING PARTY" ), notifying the Non-Selling Party of its intention to sell, transfer, assign or otherwise dispose of the whole or part of its interest in the Cooperative Joint Venture Company (the "OFFERED SHARES" ), and specifying details of the transaction including the name and address of the third party to whom it intends to offer to sell the Offered Shares involved in the transaction


or transactions, the price, and any other terms and conditions relating to the proposed sale. The Offer Notice shall include an offer to sell a portion of the Offered Shares to each of the Non-Selling Party. The percentage of the Offered Shares to be offered to any one of the Non-Selling Party shall be computed as follows:


Percentage interest of Non-Selling Party in the Profit
Distributions of the Cooperative Joint Venture Company/Total
Percentage interest of all Non-Selling Party in the Profit
Distributions of the Cooperative Joint Venture Company


The Offer contained in the Offer Notice shall be on terms and conditions no less favourable than those to be offered to the third party, and shall require each Non-Selling Party to accept the offer within thirty (30) days of the date thereof in writing whereupon:


(a) A Non-Selling Party who receives an Offer Notice may, within
thirty (30) days of the date of the Offer Notice, by notice in
writing to the Selling Party (the "ACCEPTANCE NOTICE" ),
confirm its acceptance of the Offer. The closing date for the
acquisition shall be fifteen (15) days after the date of the
Acceptance Notice.


(b) To the extent that a Non-Selling Party fails to purchase all
or a portion of the Offered Shares it is entitled to purchase,
then the Selling Party shall, in an additional Offer notice
offer such unpurchased Offered Shares (the "UNPURCHASED
OFFERED SHARES" ) to the other Non-Selling Party in equal lots
(or if there is only one other Non-Selling Party, then all of
the Unpurchased Offered Shares shall be offered to that Party)
on the same terms as and pursuant to the procedures provided
above.


(c) In the event that any Offered Shares remain unpurchased after
the expiration of thirty (30) days (the "EXPIRATION DATE" )
from the date of the last Offer Notice required to be given
above, then the Selling Party may sell the shares specified in
the Offer Notice to the third party or third parties concerned
at such price and upon such terms and conditions as shall not
be more favourable to such third party or parties than those
contained in the Offer Notice.


(d) If the Selling Party shall not dispose of the Offered Shares
or any portion thereof by the tenth calendar day following the
Expiration Date, then the Selling Party shall continue to hold
such Shares subject to the provisions of this Article.


In the case of an assignment of all or part of the interest of any of the Parties in the Cooperative Joint Venture Company, the assignee shall be bound by the terms and conditions of this Contract to the same extent as was the assignor.


ARTICLE 18


After the Parties have each made their contributions to the registered capital, an accountant registered in China shall be retained by the Cooperative Joint Venture Company for verification of such contributions. Upon the issuance of the verification report by the accountant, the Cooperative Joint Venture Company


shall issue an investment certificate to each Party signed by the Chairman and the Vice-Chairman of the Board of Directors, confirming the amount contributed by such Party.


CHAPTER VI
PROFIT DISTRIBUTIONS


ARTICLE 19


Profits shall be paid to the Parties from the after tax profits and retained earnings of the Cooperative Joint Venture Company at such times and in such amounts as may be determined by the Board of Directors. Profits of the Cooperative Joint Venture Company shall be distributed to the Parties in the following proportions:


a. Party A shall be entitled to receive a five percent (5%) share of any
profit distribution.


b. Party B shall be entitled to receive a ninety-five percent (95%) share
of any profit distribution.


To the extent that the foreign exchange reserves of the Cooperative Joint Venture Company are insufficient to pay Party B's profit distributions in foreign exchange, the Cooperative Joint Venture Company shall assist Party B in processing the conversion of any Renminbi profit distributions to Party B into foreign exchange, in accordance with regulations of the People's Republic of China concerning foreign exchange control.


CHAPTER VII
RESPONSIBILITIES OF THE PARTIES
TO THE COOPERATIVE JOINT VENTURE


ARTICLE 20


The Parties shall be responsible for the following matters:


1. Party A shall be responsible:


1.1 to obtain all government approval required under law,
regulation or administrative ruling for the establishment of
the Cooperative Joint Venture Company;


1.2 to handle matters for the establishment of the Cooperative
Joint Venture Company including applications for approval,
registration and the issuance of the business license;


1.3 to assist the Cooperative Joint Venture Company in recruiting
operational and management personnel, technical personnel,
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