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EXHIBIT 10-D
JOINT VENTURE ("JV") AGREEMENT - TERMS AND CONDITIONS
ZHUHAI SPECIAL ECONONIC ZONE
PARTY A (PRC): MIN GUANG INDUSTRIAL CO.
PARTY B (USA): XXXXX CONSUMER ELECTRONICS, INC.
It is agreed by both parties that they will enter into a JV agreement with terms
summarized as follows:
ARTICLE 1: GENERAL PRINCIPLE
Section 1: Party A and together with Party B, will abide by the Law of the
Peoples Republic of China ("PRC") on Sino-Foreign Equity Joint
Venture ("Equity JV Law") and other applicable regulations with
equally beneficial terms, hereafter agree to establish a Sino-US
joint venture in Zhuhal City, Guangdong Province of the People's
Republic of China.
ARTICLE 2: SHARE CAPITAL STRUCTURE
Section 2: Each "party" owns 50% of the JV and their contribution of Capital
will be as follows:
PARTY A: US $250,000 (cash)
PARTY B: US $250,000 (US$100,000 - cash;
US $150,000 - equipment & parts)
Section 3: Each "party" will pay an initial set up capital of US$150,000
first upon signing of this Agreement and will pay its balance within
one month after the JV's registration date. Subject to the approval
of party A and such approval
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should not be unreasonably withheld, it is agreed that any moveable
and usable fixed assets & equipments with good conditions from party
B's current factory will be brought by the JV at a price to be based
on the net book value of the injected assets using a 5-year straight
line depreciation rate method on a monthly calculation basis.
Section 4: When any of the parties wants to transfer part of all of its
investment, then the consent from the other owners must be obtained.
The written agreement of the transfer will be subject to the
approval from the board of directors, as well as, the applicable
government agency of the Zhuhai Municipaly Government.
If any of the parties wants to transfer all or part of his
investment, the existing investors will have the first right of
refusal and priority to buy such investment. When transferring such
ownership to outside investors, the terms and conditions offered to
such investors may not be better than those offered to the existing
investors.
ARTICLE 3: THE JOINT VENTURE ("JV")
Section 5: JOINT VENTURE COMPANY NAME: (PENDING)
ENGLISH NAME: ZHUHAI XXXXX ELECTRONICS CO. LTD.
4. Agree that it will be party B's sole responsibility to make sure
the physical balance of inventory (both refurbished products and
repairing parts) can be properly matched with the balance of the
quota books;
5. Pay for the JV's expenses on a monthly timely basis from
overseas to the JV and it is agreed that there will be no
charges to the JV for the time and traveling costs to be spent
by all the JV's directors;
6. To safeguard the assets of JV and in the event of any
loss or damages to the assets of the JV (including
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damages by fire, theft) will be the sole responsibility
of party B;
7. To pay to party A a handling fee on a monthly basis per
calculation under schedule 1 and a sum equal to party A's
portion of profits on an annual basis per calculation under
schedule 2;
8. To remit foreign currency to main bank A/C of the JV to ensure
the foreign margin balancing of the JV can be properly done.
9. To resolve any regulatory conflict outside of PRC;
10. To disclose and obtain consent from the other "party"
if any relative of the directors from each party to be
employed and work in the JV;
ARTICLE 6: PRODUCTS DISTRIBUTION
Section 11: 100% of the finished products will be exported. However, party A
will assist to obtain the domestic sales rights in PRC. Once the
domestic right is obtained, JV will first consider to use party A or
party designated by party A as its PRC sales agent with terms to be
agreed later.
ARTICLE 7: BOARD OF DIRECTORS
Section 12: The date of the JV's registration will be the date for the
establishment of the board of directors.
Section 13: The board will consist of four directors, with two directors
from each "party." The directors cannot be replaced without written
notice by both "parties" and approval by the board.
Section 14: The board is the highest overseeing body of the JV and shall
make all of the major decisions. The board will meet at least twice
a year. One in China and one in the U.S. Each party shall pay its
own expenses incurred to attend the board meetings.
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ARTICLE 8: OPERATION MANAGEMENT STRUCTURE
Section 15: Under the supervision of the board, the general manager is
responsible for managing the company. He is appointed and can be
terminated by the board. All other senior management are hired and
can be terminated by the general manager. The general manager will
be appointed by party B and approved by party A and such approval
should not be unreasonably withheld.
Section 16: The board can terminate the general manager or any other senior
management in the event of wrongful conducts.
ARTICLE 9: LABOUR MANAGEMENT
Section 17: The employment, termination, salary, labor insurance and etc.
will comply to the Law of PRC. The board will discuss and determine
the principle and have details in the Labor Policy of the JV.
ARTICLE 10: TAXATION, ACCOUNTING/FINANCE AND AUDITING
Section 18: The JV will be abide by the applicable Chinese Laws and
regulations and pay various types of taxes. The JV can also apply
for tax exemption and reductions.
Section 19: The JV shall abide by the PRC Sino-Foreign Joint Venture
Accounting Regulation and set up accounting department, hire
accounting personnel, and establish accounting procedures.
ARTICLE 11: TERMS OF THE JV
Section 20: The term of the joint venture is 5 years, starting from 1st
February, 1997. If one "party" proposes, with the consent from the
board, the JV can apply for extension of the term six months before
the expiration.
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ARTICLE 12: TRANSITION PERIOD AND PARTY B'S CURRENT JV IN SHENZHEN
Section 21: Before the setting up of the JV, production can be started in
Zhuhzi once the factory is selected by temporary using Party A's
repairing license. However, once the registration of the JV is made,
the temporary arrangement should be stopped and transfer back to the
JV.
Section 22: In addition, both parties agree that there will be a transition
period for this existing of party B's old JV in Shenzhen. However,
subject to the legal advice from party B's lawyer, if the following
actions will not violate any PRC law, Party B agrees to take
appropriate steps and best efforts to terminate its JV now located
in Shenzhen and agrees not to ship in any goods to that JV without
party A's written consent.
ARTICLE 13: SETTLEMENT OF THE ASSETS WHEN THE JOINT VENTURES DISOLVES
Section 23: In the event of expiration or early termination of the JV, it
will comply with regulatory measures in dissolving its capital and
distribution to the "parties" according to the capital contribution
percentages.
ARTICLE 14: INSURANCE
Section 24: The JV will obtained insurance coverage from an insurance
company in PRC. The terms that need to be insured will be determined
by the board.
ARTICLE 15: CHANGES OR TERMINATION OF THE JV AGREEMENT
Section 25: Any changes to the JV agreement needs to be authorized by a
signed agreement from each "party" and shall only be effective after
being authorized by the government agency.
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Section 26: In the event of unforeseen difficulties or if the JV is not
capable of maintaining its normal operation, then after approval
from the board and the government agency, the JV can be terminated.
Section 27: If one "party" violates the JV agreement, or do not carry out
the duties specified in the Agreement, it shall be considered a
violation of the JV Agreement by a single party. The other "party"
not only has right to seek compensation for losses incurred, but can
also report to the government agency and request the approval of
terminations for the JV.
ARTICLE 16: VIOLATION
Section 28: Each party of the JV should provide the capital for the JV
according to the date specified by the JV Agreement. Any "party"
that fails to do so will be considered in violation of the JV
agreement. The "party" abiding the JV Agreement can terminate the JV
Agreement and seek financial compensation if other "party" fails to
send the funds.
Section 29: If one "party" shall cause part or all of the JV agreement not
to be executed, then that "party" is liable for all the damages if
that under such party's control. If part or all of the JV agreement
cannot be executed by more than one "party", each "party" involved
will be liable based on the actual situation.
ARTICLE 17: FORCE MAJEURE
Section 30: In the events of earthquake, flood, war, changes in the
regulations in PRC, or other unforeseeable instances, the results of
such events which cannot be avoided or prevented, which directly
affects the execution of the JV Agreement and shall cause violation
of the terms and conditions of the JV Agreement, then the "party"
being affected should notify the other "party" immediately. The
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notice should describe the details and the reasons for not being
able to execute all or part of the JV Agreement. Based on the actual
situation, both parties will discuss and determine the termination
of JV Agreement, partial waiver of some of the responsibilities,
other appropriate solution.
ARTICLE 18: APPLICABLE LAW
Section 31: The establishment, explanation, enforcement and settlement of
any argument under the JV Agreement will be governed by the laws of
PRC.
ARTICLE 19: SETTLE DISAGREEMENT
Section 32: Any disagreement in execution of the JV Agreement shall be
settled through friendly discussion and negotiation between both
"parties". Remaining issued shall be submitted to the arbitration
committee of the China international Trade Development Commission of
an independent third party arbitration body in a mutually agreed
upon third country location. The arbitration will conducted based on
the existing regulation and rules of the arbitration body. The
settlement will be final and enforced.
Section 33: In the process of arbitration, other items of the JV Agreement
should be carried on.
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ARTICLE 20: AGREEMENT EFFECTIVENESS
Section 34: This agreement is signed on this 17th day of January, 1997 by
and will be effectively starting from 1st February, 1997.
ZHUHAI SPECIAL ECONOMIC ZONE
PARTY A: MIN GUANG INDUSTRIAL CO.
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TITLE: GENERAL MANAGER
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SIGNATURE:
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NAME:
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PARTY B: XXXXX CONSUMER ELECTRONICS, INC.
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TITLE: CHAIRMAN
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SIGNATURE:
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NAME:
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XXXXXXX X XXXXXX
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SCHEDULE 1:
HANDLING FEE PAYABLE BY PARTY B TO PARTY A
Party B agrees to pay to party A a handling fee in each year on a monthly basis
in arrears based on the following calculation:
1. 1.5% of the Total Accumulated Value of goods being exported by
the JV from 1st of February of each year up to the relevant
months of calculation minus the accumulated handling fees paid
up till the month just before (Note); or
2. US$12,500 x number of accumulated months from 1st February of
each year up to the relevant month of calculation minus the
accumulated handling fees paid up till the month just before;
whichever is higher:
(Note: The applicable rate from the second year will be reduced form
1.5% to 1%)
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SCHEDULE 2
PROFITS SHARING CALCULATION
1. PREPARING OF FINANCIAL STATEMENTS
By each year end (Using 1st February to 31st January as the financial
period), party B agrees to prepare an income statements within two months
to calculate the profits and loss position of JV, subject to review to be
performed by party A, based on the followings:
INCOME: 20% x Annual Output Value of the JV;
COST OF REPAIRING PARTS: ACTUAL OR 6% OF
ANNUAL OUTPUT VALUE
OF THE JV, WHICHEVER
IS LOWER;
EXPENSE:
- JV'S EXPENSE
- ALL FREIGHT CHARGES FROM HK/MACAU TO PRC AND VICE VERSA;
- ALL TRANSPORTATION/HANDLING FEE FOR GOODS/PARTS GOING INTO
PRC;
- HANDLING FEE PAID/PAYABLE TO PARTY A UNDER SCHEDULE 1;
2. ANNUAL PROFITS PAYABLE TO PARTY A
Party B agrees to pay to Party A by each financial year end within two
months an amount equal to 50% of the profits of the JV, if any, based on
calculation shown in para. 1 above.
PROFITS/(LOSS)=(INCOME-COST OF REPAIRING PARTS-EXPENSE).
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It is agreed that party A will not responsible for any "loss" to be
incurred by the JV and such loss shall not be used to reduce the
registered capital of each party of the JV. (For the purpose of this
section, the loss from any financial year, if any, will not able to either
carried forward or carried backward for the calculation of each year's
annual profits.)
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SCHEDULE 3
COMPENSATION PAYABLE TO PARTY B BY PARTY A AS A RESULT OF DELAY IN EXPORT GOODS
It is agreed that party A will use its best effort to assist to export the goods
from the JV, except for any circumstances arouse as mentioned in Section 30 in
this Agreement or any delay that being caused by party B, Party A agrees:
1. To pay to party B an interest charges based on the calculation shown below
starting from seven working days after notification from party B for
requirement to export refurbished goods from the JV.
Interest Charges=Interest rate* x Value of exported goods being
delayed
x number of days delayed up from first day up to 60
days
(*Using London Inter-bank Borrowing rate)
2. However, if the number of days exceed 60 days, party A agrees to arrange
an non-interest bearing loan equal to 30% of the value of exported goods
being delayed to party B plus an interest based on the following
calculation starting from the 61 days of delay:
Interest Charges=Interest rate* x 70% of Value of exported goods
being delayed x number of days delayed starting
from the 61 days onwards
(*Using London Inter-bank Borrowing rate)
3. Party B agrees to immediately repay the above loan once the goods being
exported from China.
4. The above obligations of Party A will automatically canceled starting from
second year of this Agreement.
