Exhibit 10.4
CONTRACT FOR CHINESE FOREIGN EQUITY
JOINT VENTURES
Chapter 1 General Provisions
In accordance with the "Law of the People's Republic of
China on Chinese-Foreign Equity Joint Ventures" and other
relevant laws and regulations for China's Special Economic Zones,
Xxxxx Xx and X.X. Xxxxxx Science Corporation adhering to the
principle of equality and mutual benefit and through friendly
consultations, agree to set up a joint venture enterprise in
Shenzhen Special Economic zone, Guangdong Province, P.R. China.
The contract hereunder is concluded.
Chapter 2 Parties to the Joint Venture
Article 1
Parties to this contract are as follows: X.X. Xxxxxx
Science Corporation (hereinafter referred to as Party A),
registered with the United States, legal address: Nevada, U.S.
Legal representative: Name: Xxxxxxx Xx
Position: Chairman of the Board
Nationality: P.R. China
Legal representative: Xxxxx Xx (hereinafter referred to as
Party B)
Sex: Female
Nationality: Changde, Hunan Province, P.R.
China
Natural person
ID: 432401381012202
She is one of the stockholders of Shenzhen Jinzhenghua Transport
Industrial Development Co., Ltd., P.R. China
Chapter 3 Establishment of the Joint Venture Company
Article 2
In accordance with the "Law of the People's Republic of
China on Chinese-Foreign Equity Joint Ventures" and other
relevant laws and other regulations for China's Special Economic
Zones, both parties to the joint venture agree to set up a joint
venture limited liability company.
Article 3
The name of the joint venture company is [name in Chinese
characters]. The name in foreign language is Shenzhen Jinzhenghua
Traffic and Transportation Industrial Development Co., Ltd.
(hereinafter referred to as the joint venture company).
The legal address of the joint venture company is at 0 & 0/X
Xx'xx Xxxx., Xxxxxx Xxxxxxxx, Xxxxxxxx Special Economic Zone.
Article 4
All activities of the joint venture company shall be
governed by the laws and pertinent rules and regulations of the
People's Republic of China.
Article 5
The organization form of the joint venture company is a
limited liability company. Each party to the joint venture
company is liable to the joint venture company within the limit
of the capital subscribed by it. The profits, risks and losses
of the joint venture company shall be shared by the parties in
proportion to their contributions of the registered capital.
Chapter 4 The Purpose and Scope of Production and Business
Article 6
The purpose of the parties to the joint venture is to
develop China's traffic and transportation industry through
making full use of the advantages of the two parties and the
potentiality in domestic freight with automobiles, and
introducing foreign investment; to create a scientific and
systematic service network to transport passengers and goods with
automobiles so as to serve for agriculture, industry, business
trade and travel industry and to gain the highest social and
economic returns.
Article 7
The productive and business scope of the joint venture
company is to invest into the entities (the specific projects
shall be applied separately), to transport goods and passengers
on highway, storage, automobile accessories, domestic trade, the
supply and marketing of goods and materials (the monoplied goods
are concluded).
Chapter 5 Total Amount of Investment and the Registered Capital
Article 8
The total amount of the joint venture company is $20
million.
Article 9
Investment contributed by the parties is $10 million, which
will be the registered capital of the joint venture company.
Of which: Party A shall pay $9.2 million, accounts for 92%,
Party B shall pay $800 thousand, accounts for 8%.
Article 10
Both Party A and Party B will contribute the following as their
investment:
Party A: cash $9.2 million (Party A contributes in
Renminbi, the exchange of RMB into US$ shall be based on China's
foreign exchange rate on the date of the registration)
Party B: cash $800 thousand, contributing in objects or
cash
(Note: When contributing industrial property as investment,
Party A and Party B shall conclude a separate contract to be a
part of this main contract.)
Article 11
The registered capital of the joint venture company shall be
paid in two installments by Party A and Party B according to
their respective proporation of their investment.
Each installment shall be as follows:
Party A shall pay 60% of the capital, that is $5.52 million;
Party B shall pay 60% of the capital, that is $480 thousand on
the date of registration;
Both Party A and Party B shall pay the remaining capital
within three months from the date of registration.
Article 12
In case any party to the joint venture intends to assign all
or part of his investment subscribed to a third party, consent
shall be obtained from the other party to the joint venture, and
approval from Shenzhen Municipal Government.
When one party to the joint venture assigns all or part of
his investment, the other party has preemptive right.
Chapter 6 Responsibilities of Each Party to the Joint Venture
Article 13
Party A and Party B shall be respectively responsible for
the following matters:
Responsibilities of Party A:
1. Handling of applications for approval of the joint
venture company from Shenzhen Municipal Government; handling of
application for registration, business license and other matters
concerning the establishment of the joint venture company from
Shenzhen Industrial and Commercial Management Administration;
2. Providing cash in accordance with the stipulation in
Article 10 and 11;
3. Assisting the joint venture company in purchasing or
leasing equipment, materials, articles for office use, means of
transportation and communication facilities etc.;
4. Assisting the joint venture company in contacting and
settling the fundamental facilities such as water, electricity,
transportation etc.;
5. Assisting the joint venture company in recruiting
Chinese management personnel, technical personnel, workers and
other personnel needed;
6. Assisting Party B for the certification for staying
temporarily, work license, and processing their travelling
matters;
7. Responsible for handling other matters entrusted by the
joint venture company;
Responsibilities of Party B:
1. Providing capital in accordance with the stipulation in
Article 10 and 11;
2. Training the technical personnel and workers of the
joint venture company;
3. Responsible for handling other matters entrusted by the
joint venture company.
Chapter 7 The Board of Directors
Article 14
The date of registration of the joint venture company shall
be the date of the establishment of the board of directors of the
joint venture company;
Article 15
The board of directors are composed of seven directors, of
which four shall be appointed by Party A, three by Party B. The
chairman of the board shall be appointed by Party B, and the
vice-chairman by Party A. The term of office for the directors,
chairman and vice-chairman is three years, their term of office
may be renewed if continuously appointed by the relevant party.
Article 16
The highest authority of the joint venture company shall be
its board of directors. It shall decide all major issues
concerning the joint venture company. Unanimous approval shall
be required before any decisions are made concerning major
issues. As for other matters, approval by a majority of 2/3 or
over majority shall be required.
Article 17
The chairman of the board is the legal representative of the
joint venture Company. Should the chairman be unable to exercise
his responsibilities for some reasons, he shall authorize the
vice-chairman or any other directors to represent the joint
venture company temporarily.
Article 18
The board of directors shall convene at least one meeting
every year. The meeting shall be called and presided over by the
chairman of the board. The chairman many convene and interim
meeting based on a proposal mande by more than one third of the
total number of directors. Minutes of the meeting shall be
placed on file.
The meeting of the board of directors shall be convened at the
legal address of the joint venture company usually.
Chapter 8 Business Management Office
Article 19
The joint venture company shall establish a management
office which shall be responsible for its daily management. The
management office shall have a general manager, a deputy general
manager both invited by the board of directors whose term of
office is three years.
Article 20
The responsibility of the general manager is to carry out
the decisions of the board meeting and organize and conduct the
daily management of the joint venture company. The deputy
general manager shall assist the general manager in his work.
When handling the major issues, the general manager shall
discuss with the deputy general manager.
Article 21
In case of graft or serious dereliction of duty on the part
of the general manager and deputy general manager, the board of
directors shall have the power to dismiss them at any time.
Chapter 9 Purchase of Equipment
Article 22
In its purchase of required raw materials, fuel, parts,
means of transportation and articles for office use, etc., the
joint venture company shall give first priority to purchase in
China where conditions are the same.
Chapter 10 Labor Management
Article 23
Labor contract covering the recruitment, employment,
dismissal and resignation, wages, labor insurance, welfare,
rewards, penalty and other matters concerning the staff and
workers of the joint venture company shall be drawn up between
the joint venture company as a whole or individual employees in
accordance with the "Regulations of the People's Republic of
China on Labor Management in Chinese-Foreign Equity Joint
Ventures and its Implementation Rules."
The labor contracts shall, after being signed, be filed with
the Administration of Labor of Shenzhen.
Article 24
The appointment of high-ranking administrative personnel
recommended by both parties, their salaries, social insurance,
welfare and the standard of travelling expenses etc. shall be
decided by the meeting of the board of directors.
Chapter 11 Taxes, Finance and Audit
Article 25
Joint venture company shall pay taxes in accordance with the
stipulations of Chinese laws and other relative regulations.
Article 26
Staff members and workers of the joint venture company shall
pay individual income tax according to the "Individual Income Tax
Law of the People's Republic of China."
Article 27
Allocations of reserve funds, expansion funds of the joint
venture company and welfare funds and bonuses for staff and
workers shall be set aside in accordance with the stipulations in
the "Law of the People's Republic of China on Chinese-Foreign
Equity Joint Venture". The annual proporation of allocations
shall be decided by the joint venture board of directors
according to the business situations of the joint venture
company.
Article 28
The joint venture company shall form an accounting office,
provide accountants and stipulate the accounting system in
accordance with the "The Accounting System of the People's
Republic of China on Chinese-Foreign Equity Joint Venture".
The accounting system of the joint venture company shall be
filed in the Administration of Finance of Shenzhen and the
Administration of Taxes of Shenzhen.
Chapter 12 Duration of the Joint Venture
Article 29
The duration of the joint venture company is 15 years. The
establishment of the joint venture company shall start from the
date of which the business license of the joint venture company
is issued.
An application for the extension of the duration, proposed
by one party and unanimously approved by the board of directors,
shall be submitted to Shenzhen Municipal Government six months
prior to the expiry date of the joint venture.
Chapter 13 The Disposal of Assets After
the Expiration of the Duration
Article 30
Upon the expiration of the duration or termination before
the date of expiration of the joint venture, liquidation shall be
carried out according to the relevant law. The liquidated assets
shall be distributed in accordance with the proportion of
investment contributed by Party A and Party B.
Chapter 14 Insurance
Article 31
The joint venture company shall carry every types of
insurance at People's Insurance Company of China. Types, the
value and duration of insurance shall be decided by the board of
directors in accordance with the stipulations of the People's
Insurance Company of China.
Chapter 15 The Amendment, Alteration and Discharge of
the Contract
Article 32
The amendment of the contract or other appendices shall come
into force only after the written agreement signed by Party A and
Party B and approved by Shenzhen Municipal Government.
Article 33
In case of inability to fulfil the contract or to continue
operation due to heavy losses in successive years as a result of
force majeure, the duration of the joint venture and the contract
shall be terminated before the time of expiration after being
unanimously agree upon the board of directors and approved by
Shenzhen Municipal Government.
Chapter 16 Liabilities for Breach of Contract
Article 34
Should the joint venture company be unable to continue its
operations or achieve the business purpose stipulated in the
contract due to the fact that one of the contracting parties
fails to fulfil the obligations prescribed by the contract and
articles of association, or seriously violate the stipulations of
the contract and articles of association, or seriously violate
the stipulations of the contract and articles of association,
that party shall be deemed as unilaterally terminates the
contract. The other party shall have the right to terminate the
contract in accordance with the provisions of the contract after
being approved by Shenzhen Municipal Government as well as to
claim damages. In case Party A and party B of the joint venture
company agree to continue the operation, the party who fails to
fulfil the obligations shall be liable to the economic losses to
the joint venture company.
Article 35
Should either Party A or Party B fail to pay on schedule the
contributions in accordance with the provisions defined in
Chapter 5 of this contract, the breaching party shall pay to the
other party 3% of the contribution starting from the first month
after exceeding the time limit. Should the breaching party fail
to pay after 6 months, 3% of the contribution shall be paid to
the other party, who shall have the right to terminate the
contract and to claim damages to the breaching party.
Article 36
Should all or part of the contract and its appendices be
unable to be fulfilled owing to the fault of one party, the
breaching party shall bear the responsibilities thus caused.
Should it be the fault of both parties, they shall bear their
respective responsibilities according to actual situations.
Chapter 17 Force Majeure
Article 37
Should either of the parties to the contract be prevented
from executing the contra by force majeure, such as earthquake,
typhoon, flood, fire and war and other unforeseen events, and
their happening and consequences are unpreventable and
unavoidable, the prevented party shall notify the other party by
cable without any delay, and within 15 days thereafter provide
the detailed information of the events and a valid document for
evidence issued by the relevant public notary organization for
explaining the reason of its inability to execute or delay the
execution of all or part of the contract. Both parties shall,
through consultations, decide whether to terminate the contract
or whether to delay the execution of the contract according to
the effects of the events of the performance of the contract.
Chapter 18 Applicable Law
Article 38
The formation of this contract, its validity,
interpretation, execution and settlement of the disputes shall be
governed by the related laws of the People's Republic of China.
Chapter 19 Settlement of Disputes
Article 39
Any disputes arising from the execution of, or in connection
with the contract shall be settled through friendly
consultations, the disputes shall be submitted to China's
International Economic and Trade Arbitration Commission of the
Shenzhen Council in accordance with its rules of procedures. The
arbitral award is final and binding upon parties. The losing
party shall be responsible for the arbitral fee.
During the arbitration, the contract shall be executed
continuously by both parties except for matters in disputes.
Chapter 20 Effectiveness of the Contract and Miscellaneous
Article 40
During the arbitration, the contract shall be executed
continuously by both parties except for matters in disputes.
Article 41
The regulations of the joint venture drawn up in accordance
with the principles of this contract are integral part of this
contract.
Article 42
The contract and its appendices shall come into force
beginning from the date of approval of the Shenzhen Municipal
Government.
Article 43
Should notices in connection with any party's rights and
obligations be sent by either Party A or Party B by telegram or
telex, etc., the written letter notices shall be also required
afterwards. The legal addresses of Party A and Party B listed in
this contract shall be the posting addresses.
Article 44
The contract is signed in Shenzhen, Guangdong Province of
China by the authorized representatives of both parties on
October 8, 1997.
For Party A For Party B
(Seal) (Seal)
/s/Xxx Xxxx Xx /s/ Qi Xxx Xx
Zhi Xxxx Xx Qi Xxx Xx
Legal Representative(Signature) Legal Representative
