Contract
Sino-American Joint Venture
Hangzhou American Flavors Dairy Products Co., Ltd.
Signed by
Hangzhou Dairy Complex
and
American Flavors China, Inc.
Contents
1. General Provisions
2. Parties of the Joint-Venture
3. Establishment of the JV Company
4. Purpose, Scope, Scale of Production and Business
5. Total Investment and Registered Capital
6. Responsibilities of Each Party to the JV
7. Board of Directors
8. Purchase and Inspection of Equipment
9. Labour Management
10. Taxes, Finance, Audit and Foreign Exchange
11. Duration
12. Disposal of Assets Upon the Expiration of Duration
13. Insurance
14. Amendment alternation and Termination of the Contract
15. Liabilities for Breach of Contract
16. Force Majeure
17. Applicable Law
18. Settlement of Disputes
19. Language
20. Effectiveness of the Contract and Miscellaneous
CHAPTER 1
GENERAL PROVISIONS
In accordance with the "Law of People's Republic of China on Joint
Ventures Using Chinese and Foreign Investment" and other relevant laws,
decrees, and rules and regulations of the People's Republic of China
(hereinafter referred to as the "PRC"), adhering to the principles of
equality and mutual benefit, and through friendly negotiation; Hangzhou
Dairy Complex and American Flavors china, Inc. agree to invest jointly in
the setting up of a joint venture company in Hangzhou city, Zhojiang
province, PRC; and the contract is hereunder stipulated.
CHAPTER 2
PARTIES OF THE JOINT-VENTURE
Article 1
Parties to the contract are as follows:
Party A: Hangzhou Dairy Complex [Chinese characters] registered with
Hangzhou Municipal Industrial and Commercial Administration Bureau, Zhejiang
province, PRC.
Registered address: No 000 Xxxxx Xxxxxx Xxxx, Hangzhou
Post Code: 310004
Legal representative: Mr. Qim Genhua
Nationality: Chinese
Party B: American Flavors China, Inc. registered with the State of
Delaware, U.S.A.
Registered address: No 000 Xxxxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 X.X.X.
Legal Representative: Xx. Xxxxxxxx X. Sender
Position: Chairman
Nationality: American
CHAPTER 3
ESTABLISHMENT 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 laws,
decrees and rules and regulations of the PRC, Party A and Party B hereby
agree to set up an equity joint venture Hangzhou American Flavors Dairy
Products Co., Ltd. (hereinafter referred to as the "JV") in Hangzhou, PRC.
Article 3
The name of the JV in Chinese is:
[Chinese characters]
The name of the JV in English is:
Hangzhou American Flavors Dairy Products Co., Ltd.
Registered address of the JV is: Xx 000 Xxxxx Xxxxxx Xxxx,
Xxxxxxxx, XXX
Post Code: 310004
Article 4
All activities of the JV shall be governed by the laws, decrees and
pertinent rules and regulations of PRC.
Article 5
The organization of the JV is a limited liability company. Each party
to this contract is only liable to the JV within the limit of the investment
subscribed by the party. The profits, loss and risk of the JV shall be
shared between Party A and Party B in proportion to their respective
contribution to the JB's registered capital.
CHAPTER 4
PURPOSE, SCOPE, SCALE OF PRODUCTION AND BUSINESS
Article 6
The purpose of Parties A and B in setting up the JV is to substantiate
the good will of both Parties A and B in strengthening economic cooperation
and technical exchange; by adopting appropriate and advanced technology and
management method to produce and sell dairy products, drinks with milk
content and fruit juices; to improve the products quality, develop new
products, so as to achieve a high degree of competitiveness in quality and
price in the domestic market; and to enable both Parties A and B to realize
a satisfactory economic return.
Article 7
The scope of production and business of the JV is to produce and sell
dairy products, drinks with mild content and fruit juices.
Article 8
The scale of production of the JV is:
- ice cream 2,500 mt / year
- UHT milk 5,500 mt / year
- milk powder 1,200 mt / year
and shall increase with future development of business and production.
CHAPTER 6
TOTAL INVESTMENT AND THE REGISTERED CAPITAL
Article 9
The total amount of investment of the JV is USD 10,000,000-.
Article 10
The total investment contributed by party A and party B is USD
5,100,000- and shall be the registered capital of the JV, of which party A
shall contribute USD 2,448,000-, accounting for 48% of the registered
capital; Party B shall contribute USD 2,652, 000-, accounting for 52% of the
registered capital.
Article 11
Parties A and B shall contribute the following as their investments.
Party A: the existing factory building, machinery, management
facilities and other fixed items valued at USD 2,448,000-, (See Appendix II
"Agreement on Party A's Contribution to the Joint Venture's Registered
Capital).
Party B: USD 2,652,000-, of which USD 42,000- is in cash, the
remaining USD 2,610,000- shall be contributed in the form of imported
equipment (See Appendix III, "Agreement on Party B's Contribution to the
JV's Registered Capital")
Article 12
The registered capital of the JV shall be contributed by parties A and
B in accordance with the following schedule.
(1) Within three months from the date of the JV's business license is
issued, party A shall contribute all of its investment to the JV; Party B
shall remit USD 42,000- cash to the bank account of the JV.
(2) From the date of the JV's business licence issued and before the
end of April, 1994, party B shall deliver the equipment, valued at USD
2,610,000- at Chinese ports designated by the JV and provide a complete set
of clean xxxx of lading to the JV.
The USD 4,900,000- balance between the total amount of investment and
registered capital of the JV shall be made up in the following ways:
(1) USD 3,400,000-, when required by the JV, JV shall obtain loan(s)
from the bank.
(2) USD 1,500,000 shall be loaned to the JV by parties A and B
according to their respective investment proportion. The detailed schedule,
amount and currency shall be decided by the Board of Directors of the JV.
Article 18
If either party intends to transfer all or part of its investment in
the JV to a third party, unanimous approval of the Board of Directors and
approval from the original examination and approval authority shall be
obtained.
When one party transfers all or part of its investment, the other
party shall have a first right of refusal.
The terms and conditions of such transfer to a third party shall not
be more favourable than those offered to the other party of the JV.
CHAPTER 8
RESPONSIBILITIES OF EACH PARTY TO THE JV
Article 14
Parties A and B shall be responsible for the following matters
respectively:
Party A:
1. application to all relevant authorities in the PRC for approval,
registration, business licence and other matters concerning the
establishment of the JV;
2. providing its investment in the registered capital in accordance
with Chapter 5;
3. assisting the JV in the design and construction work concerning
the necessary re-construction of the factory building and auxiliary
facilities; assisting the JV in ascertaining such basic facilities as water,
electricity supply, road, steam and waste disposal;
4. assisting the JV in recruiting Chinese management personnel,
technical personnel, workers and other personnel needed;
5. In accordance with "Party A supply Agreement" signed between Party
A and the JV, Party A shall supply the materials and relative services
needed to the JV;
6. handling all other matters entrusted by the JV.
Party B
1. providing its investment in the registered capital in accordance
with Chapter 5;
2. assisting the JV, when entrusted by the JV, outside the PRC with
selecting and purchasing machinery and equipment;
3. responsible for the installation, modification and trial
production of the imported equipment and responsible for the expenses of
related personnel engaged for such purposes; and providing technical
information and assistance in the technical improvement, and adopting the
imported equipment to the existing factory building, its equipment and
auxiliary facilities.
4. training the technical personnel and workers for the JV;
5. handling the other matters entrusted by the JV.
CHAPTER 7
BOARD OF DIRECTORS
Article 15
A Board of Directors of the JV shall be established and become
effective on the date on which the JV's business licence is issued.
Article 16
The Board of Directors (hereinafter referred to as the BOD) shall
comprise of six (6) directors, of which three (3) shall be appointed by
Party A and three (3) by Party B. A director appointed by Party B shall
serve as the Chairman of the BOD and a director by Party A shall serve as
the Vice-Chairman. The appointment of the first BOS's director, Chairman
and Vice-Chairman is for a term of four (4) years. Any director may serve
consecutive terms if appointed by the Party which originally appointed him.
Article 17
The BOD shall be the highest authority of the JV, and shall decide all
major issues concerning the company. Unanimous approval of all directors at
the BOD's meeting shall be required before any decisions are made concerning
the following major issues:
1. Alteration of the Articles of Association of the JV.
2. Termination and dissolution and extension of the duration of the
JV.
3. Increase and transfer of the JV's registered capital.
4. Merger of the JV with other economic organizations.
5. Loan or any form of indebtedness and/or purchase of fixed assets
exceeding USD 500,000. The decision thereof shall be signed by
all the directors of party A and sent to all the directors of
Party B for their signatures and then put into implementation.
Decisions on the following issues shall be valid when adopted by a
majority of the total number of directors and shall have the approval of one
Party's A appointee and one Party B's appointee to the BOD;
1) deciding and approving the important reports submitted by the
General Manager e.g., production plan, annual business report, loans, etc.
2) approving annual financial report, budget of receipts and
expenditures, distribution plan of annual profit.
3) adopting major rules and regulations of the JV.
4) deciding the timing and location to set up branches of the JV
inside and outside of China.
5) amending rules and regulations of the JV.
6) deciding the employment dismissal, responsibilities, welfare and
term and condisitons of employment.
7) deciding the liquidation procedures, principles and members of the
liquidation committee after the termination and dissolution of the
JV.
8) deciding the drawing ratio of the "three funds" and all type of
insurance.
9) deciding all other major issues deemed necessary to be decided at
BOD's meeting.
Article 18
The JV shall establish management organization responsible for the
JV's day-to-day management of the JV.
The JV shall have a General Manager to be appointed by Party A and a
Deputy General Manager to be appointed by Party B. Both appointments shall
be approved by the BOD. The term of office for the General Manager and
Deputy General Manager is four (4) years and may serve consecutive term if
re-appointed.
Article 19
The responsibility of the General Manager is to carry out the
decisions of the BOD, organize and conduct the day to day management of the
JV, the Deputy General Manager shall assist the General Manager in his work.
The management organization shall establish several departments. The
department manager shall be responsible for the operation of their
respective department, handling the matters instructed by the General
Manager and shall be responsible to them.
Article 20
In case of graft or serious dereliction of duty on the part of the
General Manager and the Deputy General Manager, the BOD shall have the power
to dismiss them at any time deemed necessary.
CHAPTER 8
PURCHASE AND INSPECTION OF EQUIPMENTS
Article 21
Under the same conditions, the equipments, transportation vehicles and
office articles needed by the JV shall be given priority to be purchased
inside China.
Article 22
In the event the JV entrusts Party B to select and purchase equipment
outside China, a import contract shall be worked out under the relevant
regulations of the PRC. Party B shall ensure the equipment to be up to
date, suitable for use and the price thereof reasonable. Party B shall
invite party A to send personnel to participate in the purchase. The
expenses thus incurred shall be born by the JV.
Article 23
The equipment purchased from outside China by the JV shall be subject
to the inspection of Chinese commodity inspection authority under the
Commodity Inspection Regulations of PRC.
CHAPTER 9
LABOUR MANAGEMENT
Article 24
Employment, recruitment, dismissal, salary, welfare, labor insurance,
labor protection, performance bonus and disciplinary actions and other
matters concerning the staff and workers of the JV shall be handled in
accordance with the "Regulations of PRC on Labour Management in Joint
Ventures Using Chinese and Foreign Investment" and other relative
regulations.
The BOD shall formulate a plan for labor management, and the JV shall
constitute and sign Contracts of Employment with the JV's trade union
collectively or the workers individually to cover the terms and conditions
of employment, and other labor related issues.
Upon the constituting and signing of the employment contract, it shall be
filed with the labor management department.
Article 25
The employment, salary, social insurance, welfare and travel expense
standard of the high-ranking managerial personnel nominated by Parties A and
B shll be discussed and decided at BOD's meeting.
CHAPTER 10
TAXES, FINANCE, AUDIT AND FOREIGN EXCHANGE
Article 26
The JV and its staff and workers shall pay taxes in accordance with
the related Chinese laws and regulations.
Article 27
Allocations for reserve funds, development funds, welfare funds and
bonuses for staff and workers shall be set aside in accordance with the "Law
of the People's Republic of China on Joint Ventures Using Chinese and
Foreign Investment". The proportion of allocations shall be decided
manually by the BOD according to the business situations of the JV.
Article 28
The fiscal year of the JV shall be from January (1) to December 31 of
the Gregorian Calendar.
All vouchers, account books, statistic statement and reports shall be
written in Chinese and English.
Article 29
The joint venture's financial and accounting system shall be subject
to the related Chinese regulations and be filed with the local finance and
tax authority.
Article 30
All the JV's expenditure vouchers shall be valid only after being
signed by the General Manager or his authorized representative.
Article 31
The JV's financial matters shall be examined and checked by the
registered Chinese accountant engaged by the JV. The report thereof shall
be provided to the BOD and the General Manager.
If either party considers it necessary that foreign accountant or
auditor shall be independently appointed to examine the annual financial
affairs, the JV shall grant its consent. All the expenses incurred shall be
born by the engaging party.
Article 32
Within the first three months of each fiscal year, the General Manager
shall be responsible for preparing the balance sheet, profit and loss
statement and profit distribution plan of the previous year an deliver such
to the BOD for examination and approval.
Within the last three months of each fiscal year, the General Manager
shall prepare the forecast of profit distribution plan and forecast of
various funds allocation plan and submit such to the BOD, for examination.
The general manager shall prepare monthly and quarterly financial
reports and present to the BOD.
Article 33
All the JV's matters relating to foreign exchange shall be handled
under the "Provisional Regulations on Foreign Exchange Control of PRC" and
other related regulations. In the event the JV experiences an imbalance in
foreign exchange, profit to be distributed to Parties A and B shall be in
terms of renminbi (RMB).
CHAPTER 11
DURATION
Article 34
The duration of the JV is twenty (20) years.
The date of issuance of the JV's business licence is the date when the
JV is established.
Upon the unanimous approval from the BOD meeting, the application for
extension of duration proposed by one party may be, not later than 180 days
prior to the expiration date, submitted to the examination and approval
authority.
CHAPTER 12
DISPOSAL OF ASSETS UPON EXPIRATION OF DURATION
Article 355
Upon the expiration or early termination of the JV, the JV shall
proceed with liquidation in accordance with laws. After liquidation, the
property of the JV shall be distributed in proportion to each party's
investment in the registered capital of the JV.
CHAPTER 13
INSURANCE
Article 36
Insurance policies of the JV on various kinds of risks shall be
underwritten with the insurance organizations in China. The types, values,
duration and terms of insurance shall be discussed and decided by the BOD in
accordance with relevant regulations of such insurance organizations.
CHAPTER 14
AMENDMENT ALTERATION AND
TERMINATION OF THE CONTRACT
Article 37
Any amendment or alteration to this contract, or to any of the
appendices annexed hereto, shall come into force only after a written
agreement providing for such amendments or alterations has been duly signed
by Parties A and B, and approved by the original examination and approval
authorities.
Article 39
Should the JV be unable to continue its operations or achieve the
business stipulated in this contract due to the fact that any one party
hereto fails to fulfill its lawful obligation to this contract or the
Articles of Association, or seriously violates the terms of this contract or
Articles of Association, then the party concerned shall be deemed to be
unilaterally terminating this contract, and the other party to this contract
has the right to claim damages from the party concerned in addition to the
right to submit to the original examination and approval authorities for
approval to terminate this contract, if all parties to this contract agree
to continue to operate the JV under such circumstance, the breach of
contract party shall be liable for the economic losses thus cuased to the
JV.
CHAPTER 15
LIABILITIES FOR BREACH OF CONTRACT
Article 40
If any one of Parties A and B does not make its contributions to the
registered capital on schedule in accordance with the terms stipulated in
CHAPTER 5 of this contract, the party which is on breach of contract shall
pay to the other party who has made its contribution to the registered
capital on schedule, an amount equal to 1% of its subscribed investment in
the registered capital, ofr every month starting from the date of such delay
in making contribution to the registered capital. If the delay of such
nature is over a period of three (3) months, the party which abides by the
contract has the right to proceed with the termination of this contract as
stipulated in Article 39 and claim damages from the breach of contract
party, in addition to the right to claim the cumulative penalty in the
amount of 8% of its subscribed investment in the registered capital.
In the event that either party should delay its contribution due to the
events stipulated in Article 42, such party shall not be reliable in any
way.
Article 41
Due to the fault of any one of the parties to this contract which
prevents the execution, wholly or partially, of this contract, Articles of
Association and Appendices, the defaulting party shall be responsible for
all the liabilities of the breach of contract. If in the event that both
parties to this contract are in breach of contract, each party hall be
responsible for the liabilities incurred by its breachof contract according
to the actual situation.
CHAPTER 16
FORCE MAJEURE
Article 42
Should either party to this contract be prevented from performing this
contract or be unable to perform this contract according to its terms and
conditions by force majeure, such as earthquake, typhoon, flood, fire, war
and other unforseen events, the happening and consequences of which are
unpresentable and unavoidable, the affected party should notify the other
party to the contract by telex without any delay and within 15 days
thereafter provide the detailed information of the event and valid
certifying documents evidencing the occurrence of the event of force
majeure. Such documents should be issued by a public notary organization
from where the force majeure occurred, explaining the reason for the
affected Party's inability to perform or delay in performing, all or part of
this contract. Depending on the extent the performing of this contract is
affected, the parties to this contract shall, through consultation, decide
whether to terminate this contract, or to exempt the performance of part of
the obligation to this contract, or postpone the performance of this
contract.
CHAPTER 17
APPLICABLE LAW
Article 43
The making of this contract, its validity, interpretation and
execution, and settlement of any disputes concerning this contract shall be
governed by the laws and regulations of the PRC.
After the effectiveness of the contract, if and when there should be
any amendments of the Chinese laws and/or regulations, the parties may
continue to execute the contract under Article 40of the PRC Law on Foreign-
Related Economic Contract."
CHAPTER 18
SETTLEMENT OF DISPUTES
Article 44
Any disputes arising from the execution of, or in connection with,
this contract shall be settled through friendly consultation between both
parties to the contract. In the event that settlement cannot be reached
through consultations, the disputes shall be submitted for arbitration. The
defending party shall choose to be heard at the Arbitration Institute of
Stockholm Chamber of Commerce in Sweden or China International Economic and
Trade Arbitration Commission. In the event that both parties to this
contract propose arbitration, the case for arbitration shall be submitted to
the Arbitration Institute of Stockholm Chamber of Commerce. The arbitration
verdict shall be final and binding on all parties to this contract. The
arbitration fee shall be borne by the losing party.
Article 45
During the course of arbitration, this contract shall continue to be
performed except for the part which the parties to this contract are
disputing and which is undergoing arbitration.
CHAPTER 19
LANGUAGE
Article 46
This contract shall be written in Chinese and in English. Both
versions carry the same force and effect.
CHAPTER 20
EFFECTIVENESS OF THE CONTRACT
AND MISCELLANEOUS
Article 47
The appendices to this contract are stipulated in accordance with the
