The Contract for XIANYANG DNON TECH
SPECIAL ELECTRO TECHNIQUE CO., LTD. USING
CHINESE AND ITALIAN INVESTMENT.
1994 . 1 . 14
Chapter 1 General Provisions
In accordance with "The law of the People's Republic of China on Joint Ventures
Using Chinese and Foreign Investment" and other relevant Chinese laws and
regulations, XIANJIAOTONG UNIVERSITY ELECTRICAL TECHNICAL ENGINEERING CO.,
XIANYANG DEFLECTION GROUP CORP. HONGKONG WAINLINK ENTERPRISES LIMITED.and DEA
TECH MACHINERY S.P.A., adhering to the principle of equality and mutual benefit
and through friendly consultations, agree to jointly invest to set up a joint
venture enterprise in XIANYANG city ShaanXi Province the People's Republic of
China. The contract is worked out hereunder.
Chapter 2 Parties to the Joint Venture
Article 1
Parties of this contract are as follows:
XIANYANG DEFLECTION GROUP CORP. (herein after referred to as Party A)
registered with XIANYANG in China and its legal address is at XIANYANG CITY
China.
Legal representative: Name: Xx xxxxxxxxx
Position: The chairman of the board.
Nationality: China.
XI'AN XXXX XXXX UNIVERSITY ELECTRICAL TECHNICAL ENGINEERING CO.
(herein after referred to as Party B), registered with Xi'an. Its legal address
is at XianNing Xi Road Xi'an city.
Legal representative: Name: XxxXxXx.
Position: The chairman of the board.
Nationality: China.
HONGKONG WAINLINK ENTERPRISES LIMITED (herein after referred to as Party D)
registered with HONGKONG. Its legal address is at RM. 1105. HUA.QIN.
INTERNATIONAL BLDG. 000 XXXXX'X XXXX CENTRAL HONGKONG.
Legal Representative: Name: Xx. Xxxx Xxxxx Xxxx
Position: Chairman
Nationality: Hong Kong
DEA TECH MACHINERY S.P.A. (hereinafter referred to as Party C). registered with
Italy. Its legal address is at XXXXXX-X Xx Xxxxxxxx 00.
Legal representative: Name: XXXXXXXX
Position: MANAGING DIRECTOR OF DEA TECH EUROPE
Nationality:___________ ITALIAN ________.
Chapter 3 Establish of the Joint Venture Company
Article 2
In accordance with "The law of the People's Republic of China on Joint
Ventures Using Chinese and Foreign Investment" and other relevant Chinese laws
and regulations, both Parties to the joint venture agree joint venture limited
liability company (herein after referred to as the joint venture company).
Article 3
The name of the joint venture company is XianYang DNON TECH SPECIAL
ELEC-
1
TRO TECHNIQUE CO., LTD. The name in foreign language is XianYang DNON TECH
SPECIAL ELECTRO TECHNIQUE CO. LTD.
The legal address of the joint venture company is at Xx. 00 XxxXxxx Xx Xxxx
XxxxXxxx Xxxx Xxxxx Xx Xxxxxxxx.
Article 4
All activities of the joint venture company shall be governed by the laws,
decrees and pertinent rules and regulations of the People's Republic of China.
Article 5
The organization of the join venture company is a limited liability
company. Each party to the joint venture company is liability 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 contribution of the registered capital.
Chapter 4 Purpose, Scope and Scale of Production and Business
Article 6
The purpose of the parties to the joint venture is in conformity with the
wish of enhancing the economic cooperation and technical exchange to improve the
product quality, develop new products, and gain competitive position in the
world market in quality and price by adopting advanced and appropriate
technology and scientific management method, so as to raise economic results and
ensure satisfactory economic benefits for each investor.
Article 7
The productive and business scope of the joint venture company is to study,
develop and produce and business special enamelwire, enamel of special enamel
wire, high and new technical products of electrical technique.
Article 8
The production scale of the joint venture company are as follows:
1. The production capacity of the joint venture put into operation is
special enamel wire 550 T/Y at first step.
2. The production scale may be increased up with the development of the
production and operation. The production varieties may be developed.
Chapter 5 Total Amount of Investment and Registered Capital
Article 9
The total amount of investment of the joint venture company is USD
5,000,000.
Article 10
Investment contributed by the parties is USD 2,500,000 which will be the
registered capital of the joint venture company.
Of which: Party A shall pay USD 112,500 accounting for 45%, Party B shall
pay USD 250,000 accounting for 10%, Party C shall pay USD 500,000 accounting for
20%, Party D shall pay USD 625,000, accounting for 25%.
Article 11
The registered capital of the joint venture company shall be paid by Party
A, Party B, Party C and Party D according to their investment proportion. Party
A, Party B, Party C and Party D will contribute their investment cash to the
Joint Venture company according with the times in which capitals will be
necessary. In accordance with "machine purchasing contract" Party C will
arrange production of the machinery and to deliver on time.
Article 12
2
In case either Party to the joint venture intends to sell 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 the examination and approval
authority is required.
Article 13
When one party to the joint venture sell all or part of his investment, the
other party has preemptive right.
Chapter 6 Responsibilities of Each Party to the Joint Venture
Article 14
Party A, Party B, Party C and Party D shall be respectively responsible for
the following matters:
Responsibilities of Party A and Party B: Handling of applications for
approval, registration, business license and other matters concerning the
establishment of the joint venture company from relevant departments in charge
in China;
Assisting the joint venture company in purchasing or leasing equipment,
materials, raw materials, articles for office use, means of transportation and
communication facilities, etc.; Assisting the joint venture company in
contacting and setting the fundamental facilities such as water, electricity,
transportation, etc.;
Assisting the joint venture in recruiting Chinese management, personnel,
technical personnel, workers, and other personnel needed. Assisting foreign
worker and staff in applying for the entry visa, work license and processing
their traveling matters. Responsible for handling other matters entrusted by the
joint venture company, such as selecting and purchasing machinery and equipment
outside China. Responsible for other matters entrusted by the joint venture
company.
Chapter 7 Selling of Products
Article 15
In China, the joint venture's products can be handled by the Chinese
materials and commercial departments by means of agency or exclusive sales, or
be sold by the joint venture company directly.
Article 16
In order to provide after-sell service to the sold products, with the
approval of the relevant Chinese department, the joint venture company may set
up sales branches for after sell service both in China and abroad.
Article 17
The trade mark of the joint venture's products is decided by the board of
directors.
Chapter 8 The Board of Directors
Article 18
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 19
The board of directors are composed of 10 directors, of which 4 shall be
appointed by Party A, 3 by Party B, 1 by Party C, 2 by Party D.
3
The term of office for the directors, chairman and vice-chairman is four years.
Their term of office may be renewed if continuously appointed by the relevant
Party.
Article 20
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 majority or a simple
majority or a simple majority shall be required.
Article 21
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 director to represent
the joint venture company temporarily.
Article 22
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 may convene an interim meeting based on a proposal made by more than
one-third of the total number of directors. Minutes of he meetings shall be
placed on file.
Chapter 9 Business Management Office
Article 23
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, appointed by Party A; Three deputy general managers appointed
by Party B, Party C, and Party D. The general manager and deputy general
managers shall be invited by the board of directors whose term of office is 4
years.
Article 24
The responsibility of the general manger 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 managers shall assist the general manager in
his work. Several department managers may be appointed by the management office,
who shall be responsible for the works in various department respectively,
handle the matters handed over by the general manager and deputy general
managers, and shall be responsible for them.
Article 25
In case of graft or serious derelication of duty on the part of the general
manger and deputy general managers, the board of directors shall have the power
to dismiss them at any time.
Chapter 10 Equipment
Article 26
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 if quality and price are
suitable.
Article 27
The technical data, specification and properties of the equipment provided
by Party C are of advanced international technical level. The final products of
the
4
equipment should be up to the JIS and DIN.
Article 28
The delivery of equipment should be within 8 monthes after Party C received
the down- payment. For details refer to attachment 1 (The purchasing contract of
equipment).
Chapter 11 Labour Management
Article 29
Labour contract covering the recruitment, employment, dismissal and
resignation, wages, Labour insurance, welfare, rewards of the joint venture
company shall be drawn up between the joint venture company as a whole or
individual employess in accordance with the "Regulations of the People's
Republic of China on Labour Management in Join Ventures Using Chinese and
Foreign Investment" and its implementation rules:
The labour contracts shall, after being signed, be filed with the local
labour management department.
Article 30
The appointment of high-ranking administrative personnel recommended by all
parties, their salaries, social insurance, welfare and the standard of traveling
expenses, etc. shall be decided by the meeting of the board of directors.
Chapter 12 Taxes, Finance and Audit
Article 31
The joint venture company shall pay taxes in accordance with the
stipulations of Chinese laws and other relative regulations.
Article 32
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 33
Allocations for 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 Joint Ventures Using Chinese and Foreign Investment." The annual proportion
of allocations shall be decided by the board of directors according to the
business situations of the joint venture company.
Article 34
The fiscal year of the joint venture company shall be from January 1 to
December 31. All vouchers, receipts, statistic statements and reports, account
books shall be written in Chinese. (English language will be used concurrently
for main documents.)
Article 35
Financial auditing of the joint venture company shall be conducted by an
auditor registered in China and reports shall be submitted to the board of
directors and the general manager.
In case Party C considers it is necessary to employ a foreign auditor
registered in another country to undertake annual financial checking and
examination, Party A, Party B and Party D shall give their consent. All expenses
thereof shall be borne by Party C.
Article 36
5
In the first three months of each fiscal year, the manager shall prepare
previous year's balance sheet, profit and loss statement and proposal regarding
the disposal of profits, and submit them to the board of directors for
examination and approval.
Chapter 13 Duration of the Joint Venture
Article 37
The duration of the joint venture company is 12 years. The establishment of
the joint venture company shall start from the date on 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 the
Ministry of Foreign Economic Relations and Trade (or the examination and
approval authority entrusted by it) six months prior to the expiry date of the
joint venture.
Chapter 14 The Diposal of Assets after Expiration of the Duration
Article 38
Upon the expiration of the duration or termination before the date of
expiration of the joint venture, liquidation shall be carried out according in
accordance with the proportion of investment contributed by Party A, Party B,
Party C, Party D.
Chapter 15 Insurance
Article 39
Insurance policies of the joint venture company on various kinds of risks
shall be under written with People's Republic of China. Types, 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 16 The Amendment, Alteration and Discharge of the Contract
Article 40
The amendment of the contract or other appendices shall come into force
only after the written agreement is signed by Party A, Party B, Party C and
Party D and approved by the original examination and approval authority.
Article 41
In case of inability to fulfil 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 agreed upon by the board of directors and
approved by the original examination and approval authority.
Article 42
6
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 partied fails to fulfil the obligations prescribed by the
contract and articles of association, or seriously violates the stipylations of
the contract and articles of association, that party shall be deemed as
unilaterally terminating 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 the original examination and approval authority as well as to
claim damages. In case Party A, Party B, Party C and Party D 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 thus caused to the joint
venture company.
Chapter 17 Liabilities for Breach of Contract
Article 43
Should either Party A, Party B, Party C or Party D 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 0.5% of the
contribution starting from the first month after exceeding the time limit.
Should the breaching party fail to pay after 3 monthes, 0.5% 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 in accordance with the
stipulations in Article 43 of this contract.
Article 44
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.
Article 45
In order to guarantee the performance of the contract and its appendices
both Party A, Party B, Party C and Party D shall provide each other the bank
guarantees for the performance of the contract.
Chapter 18 Force Majeure
Article 46
Should either of the parties to the contract be prevented from executing
the contract by force majeure, such as earthquake, typhoon, flood, fire and war
and other unforeseen events, and their happening and consequences are
unpreverntable 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
relvant 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 to
exempt the part of obligations for implementation of the contract or whether to
delay the execution of the contract according to the effects of the events on
the performance of the contract.
7
Chapter 19 Applicable Law
Article 47
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 20 Settlement of Disputes
Article 48
Any disputes arising from the execution of, or in connection with, the
contract shall be settled through friendly consultations between both parties.
In case no settlement can be reached through consultations, the disputes shall
be submitted to the Foreign economic and Trade Arbitration Commission of the
China Council for the Promotion of International Trade for arbitration in
accordance with its rules of procedure. The arbitral award is final and binding
upon both parties.
Article 49
During the arbitration, the contract shall be executed continuously by both
parties except for matters in dispute.
Chapter 21 Language
Article 50
The contract shall be written in Chinese version and in English
version. The Chinese version shall prevail.
Chapter 22 Effectiveness of the Contract and Miscellany
Article 51
The appendices drawn upon in accordance with the principles of this
contract are integral part of this contract, including: Rules of The Joint
Venture Company
Article 52
The contract and its appendices shall come into force beginning from the
date of approval by the Ministry of Foreign Economic Relation and Trade of the
People's Republic of China (or its entrusted examination and approval
authority).
Article 53
Should notices in connection with any party's rights and obligations be
sent by either Party A, Party B, Party C, Party D by telegram or telex, etc.,
the written letter notices shall be also required afterwards. The legal
addresses of Party A, Party B, Party C, Party D listed in this contract shall be
the posting addresses.
Article 54
The contract is signed in XianYang, of China by the authorized
representatives of four parties on January 14, 1994.
8
Party A: Party B:
Party C: Party D.
