Agreement on Cooperative Investment

No.:              

Party A: XXX INTERNATIONAL LIMITED
Party B: Jiaozuo Tianrui Magnesium Alloy Co., Ltd.
Name of Project: 10000t/a magnesium alloy and deep-processing line project
Total Amount of Investment: USD$20 million
Investment Method: One-year standby letter of credit

In accordance with the relevant provisions of Company Law of the People’s Republic of China and laws and regulations for implementation, through friendly negotiation, and on the principles of being practical and realistic and mutual benefits, both parties entered into an agreement on the Project for cooperative investment subject to the terms and conditions as follows:

Article 1
The total amount of the investment is USD$20 million. The amount of the initial investment is USD$10 million, wherein USD$5 million for the first phase, and the balance for the first phase shall be deposited to Party B’s account within ninety days. The funds for the second phase shall be transferred to Party B’s account in installments before 30 June 2005.

Article 2
Investment Method: Party A shall be responsible for capital investment and Party B for offering the project scheme, which shall be confirmed and authorized by both parties.

Article 3
The cooperation term shall be five years starting from the date when the final investment is deposited to Party B’s account.

Article 4
Return method: The return on investment shall be fixed bonus, from the end of the second year, Party A shall withdraw its shares as per 33% of the total amount of the investment per year until Party A is not involved in business management for the Project any more by the end of the fifth year. All the equipment used by Party B shall be purchased by Party A during the cooperation period.

Article 5
Party B shall be responsible for the construction, production and business management for the Project, and the construction term shall be twenty four (24) months, with six (6) months for trial operational term starting from the date when USD$5 million of the first sum is deposited to Party B’s account.

Article 6
Guaranty: Business management rights for the Project (Jiaozuo Tianrui Magnesium Alloy Co., Ltd.), patent for the Project (ends when Party A finishes settles all the fixed returns).

Article 7
Cooperative Procedures:

1. Party B shall deliver the materials of the corporate and materials for the Project to Party A for verification and certification;
2. Party A and Party B shall sign the agreement on cooperative investment;
3. Party A shall conduct the on-site investigation where the Project is located along with Party B;
4. Party A shall transfer USD$5 million for the initial investment to the account opened by Party B.

Article 8
Schedule and Amounts for Party A to Transfer the Investment:
From the date when this agreement is signed, Party A shall transfer USD$5 million for the first investment sum within seven bank working days, and the balance shall be transferred to Party B’s account within ninety days; Within ninety days from the date when USD$10 million for the initial investment is deposited to the account, namely before 30 June 2005, the second amount of USD$10 million shall be transferred; and the balance on the total investment amount shall be transferred to Party B’s account in installments.

Article 9
Party B shall submit the materials for the Project of the corporate, business license, corporate code certificate, tax registration certificate, loan certificate, feasibility study report for the Project, approval and reply of project filing, official approvals of the competent authorities, approval certificate, enterprise standard, domestic and world market status and purchase list contract for the equipment and self-made equipment.

Article 10
Items to be investigated by Party A against Party B:

1. The authenticity of the materials offered by Party B;
2. Personnel organization and qualification of the project company;
3. Business status of the project company;
4. Office facilities of the project company;
5. Location and plant area plan of the plant building(s) to be built;
6. Production, supply and sales channels of the project company.

Article 11
Terms in Appropriation of the Investment:
Party A shall appropriate the investment by Party B for the specified purposes only. Party A shall send personnel regularly to inspect the appropriation status by Party B in order to ensure the normal construction for the Project.

1. The Start-up Procedures and Date for the Investment:

A. The initial investment of Party A shall be transferred to the account, and reaches the basic start-up amount for the construction for the Project (USD$10 million).
B. Party B shall perfect all the official documents in the construction for the Project and begin the construction and production from 30 November 2004 till 28 February 2005.
1. Appropriation Requirements:
A. From the investment start-up up to completion of the construction of the project company and before formally putting into production, Party A shall send one person to participate in supervising the appropriation of the investment funds;
B. Party B shall be responsible for the construction for the Project and cooperating in the production, and report and deliver monthly and quarterly project schedule and financial statements respectively to Party A;
C. Before the Project of Party B is formally put into production, in case the appropriation of one time is more than USD$1million, which shall be agreed by the personnel sent by Party A.

Article 12 Repayment requirements
1. Party B shall arrange for repayments from 1 January 2006, and pay off the investment before 30 December 2009, by means of returning the annual bonus equivalent to 33%/year of the total investment.
2. The investment amount for Party A to Party B shall be calculated starting from the end of the fourth year and ending at the expiry of the contract without interest.

Article 13
Notarization:
This agreement and supplemental agreement signed by Party A and Party B shall
be notarized with the municipal notarial office where Party B is located before 30 November 2004.

Article 14
Relevant Expenses:

1. The charges for the bank issue of drafts and handling fee for transferring in the bank shall be borne by Party B;
2. The notarial fees shall be equally borne by Party A and Party B respectively;
3. Party B is responsible for the wages (executed as per the local labor standards), accommodation, traffic, correspondence and office where the project is located for one person sent by Party A.

Article 15
Liabilities for Breach of Agreement:

1. Party A shall be responsible for the breach of agreement if any of following occurs:

A. The investment funds fail to be received as per the stated schedule and amounts under this agreement;
B. Fails to perform Party A’s liabilities and obligations stated under this agreement and supplemental agreement;
C. Delays in more than five bank working days;
D. Fails to execute the other terms agreed under this agreement.

1. Party B shall be responsible for the breach of agreement if any of following occurs:

A. The materials offered to Party A are not authentic;
B. Fails to deliver the guaranty certificate on time;
C. Fails to organize the construction and production as scheduled;
D. Fails to appropriate the investment funds for the specified project only;
E. When the cooperation term expires, fails to pay off the due bonus to Party A;
F. Fails to perform the other terms stated under this agreement.

Article 16
Penalty for Breach of Agreement (as per the terms for A. B. C. D. E. F. of Article 15 on Liabilities for Breach of Agreement under this agreement).

1. If Party A breaches the Agreement, Party B shall:

A. Compensate USD$100,000 of penalties to Party B within seven days after Party B claims for compensation;
B. Compensate for 1% of the total amount of the investment as the penalties to Party B within seven days from the date when this agreement comes into force;
C. Whatever occurs, which affects Party B’s construction, and can not be settled through negotiation, Party A shall withdraw the return in lump sum and compensate for the penalties of 5% of the total amount of the investment to Party B.

1. If Party B breaches the Agreement, Party B shall:

A. Compensate for USD$100,000 of penalties to Party A within seven days after Party A claims for compensation;
B. Compensate for 1% of the total amount of the investment as the penalties to Party A within seven days after Party A claims for compensation;
C. The return in lump sum which shall be received by Party A shall not be withdrawn, and Party B shall compensate for 5% of the total amount of Party A’s investment as the penalties within seven days;
D. Within three months when Party A offers assistance to Party B, Party B shall revise the working plan and complete all the preparations for the construction;
E. In case the more than 8% of the invested amount is misappropriated,, the personnel sent by Party A shall have the right to supervise and urge Party B to promptly correct that, if Party B fails to do so, Party A shall have the right to withdraw the balance of the funds until the contract is terminated;
F. When Party B can not repay the bonus return of Party A as scheduled, Party A can take over for the project company or the investment amount can not still be recovered during the period of trusteeship, Party A shall execute the right to dispose of Party B’s guaranty independently.

Article 17
Effectiveness and Termination of Agreement
This agreement shall come into force from the date when it is signed and stamped by the representatives of Party A and Party B respectively. When Party B settles Party A’s bonus return on the investment on the expiry date of the cooperation, the items for A. B. C. D. E. F of the Article 16 under this agreement occur, while Party A and Party B can not settle them through negotiation, this agreement shall be terminated.

Article 18
Settlement and Arbitration of Dispute
This agreement is governed by the laws of P.R. China.
In case the disputes occur in the performance of this agreement and supplemental agreement, Party A and Party B shall settle them on the basis of sincere cooperation through friendly negotiations, if both parties can not settle them, either party may file a lawsuit with the municipal arbitration committee or the people’s court where the Project is located.

Article 19
This agreement is made in quadruplicate, two originals for Party A and Party B respectively. For the matters unstated herein, an additional supplemental agreement shall be entered into through negotiations, which shall be same authentic as this agreement. ???

Party A: (Signature)               ?Party B: (Signature)

Legal Representative: (Signature)        Legal Representative: (Signature)

Day Month Year

投资合作协议书

编号： __________

甲方：XXX INTERNATIONAL LIMITED
乙方：焦作市XXX镁合金有限公司
专案名称：10000t/a镁合金及其深加工生产线项目
投资总额：贰仟万美元
投资方式：备用信用证一年期
根据中华人民共和国企业法及实施法规有关规定；就项目投资合作事宜,经双方友好协商，本着实事求是，互惠互利原则,达成如下条款,双方共同履行。
第一条：投资款总额为贰仟万美元。第一笔投资额为壹仟万美元，其中首期为伍佰万美元，第一期余额在九十天内到乙方账户。第二期资金定于2005年6月30日前分批划入乙方账户。
第二条：投资方式：甲方出资乙方出方案，由双方确定认可。
第三条：合作期限为伍年（以最后一次资金到乙方账户之日起计算）。
第四条：回报方式：固定红利回报，从第二年末起，每年按投资总额33%抽出甲方股份，至第五年末止，甲方不再参与项目经营管理。乙方使用的全部设备在合作期由甲方购置。
第五条：乙方负责项目建设、生产、经营管理，建设期为贰拾肆个月，试运营期六个月，（自第一笔伍佰万美元到乙方账户之日起计算）。
第六条：抵押物：项目（焦作市XXX镁合金有限公司）经营管理权，项目专利（直到甲方收完固定回报为止）。
第七条：合作程序：

1. 乙方将法人数据、项目数据交甲方审核认证；
2. 甲、乙双方签订投资合作协议书；
3. 甲方随乙方到项目所在地实地考察；
4. 甲方将第一笔款伍佰万美元划入乙方开设的账户。

第八条：甲方划款时间与额度：
本协议签订之日起，甲方在七个银行工作日内开出第一笔款伍佰 万美元，余额九十天内到乙方账户；自第一笔壹仟万美元款到帐之日起九十日内，即2005年6月30日前划第二笔款壹仟万美元；即投资总款余额将分批到乙方账户内。
第九条：乙方应提交法人项目资料、营业执照、法人代码证、税务登记证、贷款证，项目可行性研究报告、立项批复、政府主管部门批文、批准证书、企业标准国内、国际市场状况，设备自制设备购置表合同。
第十条：甲方考察乙方内容：

1. 验证乙方提供数据的真实性；
2. 项目公司的人员编制及素质；
3. 项目公司经营运转状况；
4. 项目公司的办公设施；
5. 待建厂房的位置、厂区规划；
6. 项目公司产、供、销途径。

第十一条：资金使用的规定：
甲方对乙方的投资款项必须专款专用。甲方派员定期审核乙方对资金的使用状况，确保项目正常建设。

1. 资金启动程序与时间：
1. 甲方投资款第一笔到帐，达到项目建设启动基本金额（壹仟万美元）。
2. 乙方自2004年11 月30日至2005年2月28日前完善项目建设所有批文并开工建设和协作生产。
2. 使用要求：
1. 资金启动开始至项目公司建设完毕，正式投入生产前，甲方派员一名参与监督资金使用；
2. 乙方项目建设和协作生产，分别向甲方报送月、季度工程进度及财务报表；
3. 乙方项目正式投入生产前，一次使用款项资金在美元壹佰万元以上，需经甲方派员参与并同意。

第十二条：还款要求：

1. 乙方需在2006年01月01日起准备还款， 2009年12月30日前还清，以每年计红利33%回报。
2. 甲方对乙方的投资款从第肆年末计算，到合同期满，届时不还利息。

第十三条：公证
甲 乙双方签订的本协议及补充协议2004年11月30 日前到乙方所在地市公证处公证。
第十四条：有关费用负担：

1. 银行开票，入行手续费用由乙方负担；
2. 公证费，甲、乙双方均担；
3. 乙方负责甲方派驻一人在项目方的工资（按当地劳资标准执行），住宿及交通，通讯、办公。

第十五条：违约责任：

1. 甲方：
1. 资金不按本协议规定的时间、额度到位；
2. 不履行本协议和补充协议规定的甲方责任和义务；
3. 延误五个银行工作日以上；
4. 未能执行本协议约定的其它条款。
2. 乙方
1. 提供给甲方的数据不真实；
2. 末按期交付抵押物证；
3. 未能按期组织开工建设生产；
4. 未能作到专款专用；
5. 投资合作期满，未能还清甲方应得红利；
6. 未能执行本协议约定的其它条款不。

第十六条：违约处罚（依照本协议第十五条违约责任A、B、C、D、E、F条款规定）。

1. 甲方违约：
1. 在乙方提出后七日内赔偿乙方壹拾万美元违约金；
2. 签订协议生效之日起七日内，赔偿乙方投资总额1%的违约金；
3. 发生影响乙方施工建设，且无法协商，退还一次性回报并赔偿乙方投资总额5%的违约金。
1. 乙方违约：
1. 在甲方提出七日内赔偿甲方壹拾万美元违约金；
2. 在甲方提出七日内赔偿按投资总额的1%的违约金；
3. 甲方所应收的一次性回报不退，在七日内赔偿甲方投资额的5%的违约金；
4. 甲方协助乙方三个月内，修改工作计划，完成所有开工前的准备工作；
5. 项目外使用投资款超过8%时，甲方派驻人员有权督促乙方即行更正，如不予更正，甲方有权收回余额资金，直至解除合同；
6. 应乙方不能按期偿还甲方红利回报时，甲方对项目公司进行接管或托管期内仍无法收回投资款，甲方将行使独立处理乙方抵押品的权利。

第十七条：本协定生效与终止：
本协议自甲、乙双方代表签字盖章生效。合作期满，乙方付清甲方投资红利回报时，本协议第十六条A、B、C、D、E、F项生发生，而甲、乙方双方无法调节时，本协议终止。
第十八条：争议的解决与仲裁：
本协定限适用于中国境内法律。
本协议和补充协议的执行发生争议时，甲、乙双方均应本着真诚合作的态度友好协商解决，确无法调解时，双方在项目所在地市仲裁委员会或项目所在地的人民法院诉讼解决。
第十九条：本合同壹式肆份，甲、乙双方各执贰份。未尽事宜，经协商另行补充协议，补充协议与本协议具有同等法律效力。

甲　　 方:                 乙　　 方:

法定代表人:               法定代表人:

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