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THE CHINESE-FOREIGN EQUITY JOINT VENTURE
SHANGHAI IKS XXXX MECHANICAL BLADE CO. LTD.
JOINT VENTURE COMPANY CONTRACT
September 24, 1995
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TABLE OF CONTENT
PAGE
CHAPTER 1 General Provisions 6
CHAPTER 2 Parties to the Joint Venture 7
CHAPTER 3 Establishment of the Joint Venture Company 9
CHAPTER 4 The Purpose, Scope and Scale of Business 12
CHAPTER 5 Total Amount of Investment, Registered
Capital and Additional Funds 13
CHAPTER 6 Responsibilities of the Parties 22
CHAPTER 7 Board of Directors 26
CHAPTER 8 Business Management 31
CHAPTER 9 Labor Matters 36
CHAPTER 10 Transfer of Technology 38
CHAPTER 11 Site, Buildings, Environment 40
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CHAPTER 12 Purchase of Assets, Services, Equipment
and Materials 41
CHAPTER 13 Sale of Products 42
CHAPTER 14 Taxes, Finance, Audit, Profits and
Foreign Exchange 45
CHAPTER 15 Insurance 52
CHAPTER 16 Duration of the Joint Venture Company 53
CHAPTER 17 Amendment and Termination of the Contract 54
CHAPTER 18 Liabilities for Breach of the Contract 59
CHAPTER 19 Force Majeure 61
CHAPTER 20 Applicable Laws 62
CHAPTER 21 Confidentiality and Exclusivity 63
CHAPTER 22 Settlement of Disputes 65
CHAPTER 23 Effectiveness of the Contract and
Miscellaneous 66
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Annexes:
No. of Pages/
Each Annex
Annex A Registration Certificate of Party A 2
Annex B Registration Certificate of Party B 2
Annex C Articles of Association 46
Annex D Party A's Capital Contribution 15
Annex E Party B's Capital Contribution 2
Annex F List of Items Imported Out of the Total
Investment 1
Annex G Product Line 20
Annex H Site and Conditions 2
Annex I1 Technology Transfer Contract (Party A/JVC) 20
Annex I2 Technical Engineering, Consultant, Assistance &
Training Service Agreement (Party B/JVC) 58
Annex J1 Trademark License Contract (Party A/JVC) 12
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Annex J2 Trademark and Name License Contract
(Party B/JVC) 15
Annex K Export Sales Contract 41
Annex L Service Agreement 13
Annex M List according to Article 59.3 of this Contract 4
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CHAPTER 1 General Provisions
In accordance with the "Law of the People's Republic of China on China Foreign
Equity Joint Ventures", and its supplements (hereinafter the "Joint Venture
Law") and other relevant Chinese laws and regulations, the Shanghai Printing &
Packaging Machinery General Corporation in Shanghai, People's Republic of China
(hereinafter "PRC") and IKS Klingeinberg Far East GmbH. Federal Republic of
Germany, agree in this Contract (hereinafter "the Contract") to jointly invest
in and establish an equity joint venture company for the development,
manufacture, sale and maintenance of mechanical blade products and related
equipment products.
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CHAPTER 2 Parties to the Joint Venture
ARTICLE 1
The Parties to the Contract are:
Shanghai Printing & Packaging Machinery General Corporation of the PRC
(hereinafter referred to as "Party A"), a state-owned enterprise registered with
the State Administration of Industry and Commerce in Shanghai, PRC,
(Registration No.150071100, copy of registration certificate attached as Annex
A) and with its legal address at: Xx. 000 Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxx.
Legal Representative:
Name: Xx Xxxxx-an
Position: General Manager
Nationality: People's Republic of China
IKS Klingeinberg Far East GmbH of the Federal Republic of Germany (hereinafter
referred to as "Party B"), registered with the commercial register of Remscheid,
Federal Republic of Germany (registration no. HRB 1870, copy of registration
certificate attached as Annex B) and with its legal address at: Industriegebiet
Bergisch Born, Xx xxx Xxxxxx 00, 00000 Xxxxxxxxx, Xxxxxxx Xxxxxxxx of Germany.
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Legal Representative:
Name: Xxxxxx Xxxxx
Position: Managing Director
Nationality: Federal Republic of Germany
(hereinafter sometimes collectively referred to as the "Parties" and, if the
situation requires, in the singular the "Party").
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CHAPTER 3 Establishment of the Joint Venture Company
ARTICLE 2
In accordance with the Joint Venture Law and other relevant Chinese laws and
regulations, the Parties agree to establish an equity joint venture limited
liability company (hereinafter "JVC") to develop, manufacture, sell and
maintain certain products in the PRC.
ARTICLE 3
3.1 The name of JVC in Chinese is:
The name of JVC in English is:
Shanghai IKS Xxxx Mechanical Blade Co. Ltd.
The legal address of JVC is: Xx. 0000, Xxxxx Xx Xx., Xxxxxxxx, XXX.
3.2 JVC shall consistently use its name in all its activities.
Trademark and Name License Contracts are attached as Annex J1 and Annex
J2 to this Contract.
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Should Party B's share in the registered capital fall below fifty one
percent (51%), Party B may request JVC to change its name to no longer
include "IKS". Should JVC fail to comply with these obligations, Party B
is hereby given the authority to accomplish all relevant steps in order
to change the name.
After the expiration or termination of JVC, neither Party shall be
permitted to the subsequent use of the name of JVC without the consent of
the other Party. Party B shall continue to be free to use or to grant
third parties the right to use the name "IKS" at all times during the
duration and after the termination or expiration of JVC.
ARTICLE 4
All activities of JVC shall be governed by the promulgated and publicly
available laws, decrees and pertinent rules and regulations of the PRC.
Activities of the JVC outside the PRC shall comply with applicable foreign laws,
decrees and rules and regulations.
ARTICLE 5
JVC shall be a limited liability company. The liability of JVC shall be limited
to its total assets. The liability of each Party shall be limited to its
contribution to the registered capital.
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It is understood and agreed that in addition to its share of the registered
capital specified in Article 10 below, neither Party shall be obliged hereunder
to provide or contribute any further capital to JVC.
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CHAPTER 4 The Purpose, Scope and Scale of Business
ARTICLE 6
The purpose of the Parties in entering into the Contract and establishing JVC
are to enhance economic cooperation and technical exchanges between the PRC and
the Federal Republic of Germany and to contribute to the development of the
production of mechanical blade products in the PRC. The Parties agree to use
advanced and appropriate methods for the manufacture of its products and to open
new domestic markets and international markets for the products with the aim of
raising long term economic results and long term economic benefits for each
investor.
ARTICLE 7
7.1 The business scope and scale of JVC shall be the development, production
and sale of mechanical blade products and related equipment products and
providing related technical services.
7.2 Products of JVC are specified in Annex G (hereinafter "the Products").
7.3 The expected and planned annual production capacity of JVC shall be
specified in the Feasibility Study Report, and it is intended to reach a
production output equal to an annual sales value of RMB35,000,000 -
45,000,000 within four (4) to five (5) years.
7.4 Upon decision by the Board of Directors, the JVC may establish branches
in the PRC and other countries.
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CHAPTER 5 Total Amount of Investment, Registered Capital and Additional Funds
ARTICLE 8
The total amount of investment of JVC shall be 4,940,000 US-Dollar.
ARTICLE 9
The registered capital of JVC shall be 2,470,000.00 US-Dollar.
ARTICLE 10
10.1 Party A shall contribute forty-nine percent (49%) of the registered
capital, equivalent to 1,210,000.00 US-Dollar, by contributing the
following:
10.1.1 Machinery, Equipment, Parts and Tools:
(1) machinery, equipment
(2) parts
(3) tools
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10.1.2 Factory and Office Building
The ownership rights of the factory and office building specified
in List 2 of Annex D.
10.1.3 Land Development Fee
The Land Development Fee for the Site described in Annex H.
The total value of the items described above 10.1.1 - 10.1.3 is
755,000.00 US-Dollars.
10.1.4 An RMB amount equal to 35,000.00 US-Dollars converted from the
development and reserve funds of JVC into registered capital.
10.1.5 Party A shall transfer the ownership of the office and bicycle
parking place, of which value is equal to 19,100 US-Dollars, to
the JVC.
10.1.6 RMB in the amount equivalent to 400,900.00 US-Dollars in cash.
all as specified in Annex D to this Contract.
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10.2 Party B shall contribute fifty-one percent (51%) of the registered
capital, equivalent to 1,260,000.00 US-Dollar, by contributing the
following:
10.2.1 The share of Sun Lung Industrial Ltd., the previous foreign party
to the JVC, with a value of 315,000.00 US-Dollars.
10.2.2 An amount equal to 15,000.00 US-Dollars converted from the
development and reserve funds of JVC registered capital.
10.2.3 Cash in the amount of 930,000.00 US-Dollars.
all as specified in Annex E to this Contract.
10.3 The amount equal to the difference between the total amount of investment
and the registered capital shall be borrowed by the JVC itself from
banks.
A security to be provided for such loans shall be solely provided by JVC.
Neither Party shall be obliged to provide any security.
10.4 Out of the total investment, machinery, equipment, parts and tools shall
be imported by JVC as listed in Annex F. The Board of Directors may
decide to amend Annex F in accordance with the practical requirements of
the JVC.
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ARTICLE 11
11.1 Payment of the Parties' contributions to the registered capital of JVC
shall be made as follows:
11.1.1 Party A shall make its capital contribution, as defined in
Article 10, within the time frame specified in Annex D as
follows:
-- The ownership of Machinery, Equipment, Tools and Parts as per
item 1.1 of Annex D of the Contract, shall be provided by
Party A to the JVC within two (2) weeks after the date of
the issuance of the business license of the JVC showing
Party B as Party to JVC (hereinafter referred to as "Revised
Business License").
-- The factory and office building, per List 2 of Annex D, shall
be transferred as per the date of issuance of the Revised
Business License of the JVC and shall be considered effected
upon issuance of a building ownership certificate for JVC.
-- The land development fee provided as per item 1.3 of Annex D
shall be transferred to the JVC within two (2) weeks after
the date of the issuance of the Revised Business License of
the JVC.
-- The amount converted from the development and reserve funds
into registered capital shall be effected on the date of
issuance of the Revised Business License of JVC.
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-- The ownership of the office and bicycle parking place as per
item 1.5 of Annex O shall be transferred to the JVC as per
the date of issuance of the Revised Business License of the
JVC.
-- Party A shall contribute its cash contribution to the JVC's
bank account within ninety (90) days upon the date of
issuance of the Revised Business Licence of the JVC.
11.1.2 Party B shall make its capital contributions, as defined in
Article 10, within the time-frame specified in Annex E as
follows:
-- The value of the share acquired by Party B from Sun Lung
Industrial Ltd. shall be considered effected on the date of
the Revised Business License of the JVC.
-- The amount converted from the development and reserve funds
shall be considered effected on the date of issuance of the
Revised Business License.
-- Party B shall contribute fifteen percent (15%) of its cash
contribution to the JVC's bank account within ninety (90)
days, and the remaining cash contribution within six (6)
months after the date of issuance of the Revised Business
License of the JVC.
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Party B's cash contribution shall be paid in US-Dollar and its
value in RMB, calculated according to the official exchange rate
of the PRC at the date of such payment shall not influence its
share to the registered capital as per the date of signing of
this Contract.
11.2 Neither Party shall be obliged to make any capital contribution until
each of the following conditions precedent has been fulfilled (or waived
by both Parties):
(1) The existing joint venture company between Party A and
Consolidated Deed & Development Inc., USA, i.e. Shanghai Xxxx Xxxx
Da Mechanical Blade Co. Ltd., has been terminated and the business
license been returned to the Shanghai Administration for industry
and Commerce.
(2) Receipt of a confirmation by a bank to grant a loan covering the
amount equal to the difference between the total amount of
investment and the registered capital of the JVC.
(3) The business license of Shanghai IKS Mechanical Blade Co., Ltd.
established with joint investment by Party A and Party B, has been
issued.
(4) The business license of Shanghai Achieve Mechanical Blade Co., has
been revised showing Party B as Party to it.
(5) The JVC has obtained a land use right certificate concerning the
land use rights for the Site described in Annex H in accordance with
the conditions described in Annex H.
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ARTICLE 12
Capital contributions shall be verified by a registered certified public
accountant of the PRC, who shall issue a report verifying the capital
contributions of each Party to date within sixty (60) days after the respective
capital contribution has been made. JVC, on the receipt of correct and effective
verification reports, shall issue a Certificate of Capital Contribution to each
Party.
If the value of any capital contribution verified by the registered certified
public accountant exceeds the value set forth in Article 10.1 or 10.2, any
surpassing amount shall be paid back by the JVC to the respective Party within
thirty (30) days after receipt of the Capital Contribution Certificate. If its
value is less than the value set forth in Article 10.1 or 10.2, the less amount
shall be made up in cash by the respective Party within thirty (30) days after
receipt of the Capital Contribution Certificate.
ARTICLE 13
During the duration of JVC, the Parties may not reduce the registered capital of
JVC, and neither Party may reduce its amount of capital contribution.
The registered capital of JVC may be increased upon unanimous decision made by
the Parties who shall then cause their nominees to the Board of Directors to
approve such increase and submit it to the examination and approval authority
for approval.
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ARTICLE 14
14.1 Neither Party shall sell, assign, mortgage, pledge or otherwise transfer
all or any part of its share of the registered capital to a third party
without the written consent of the other Party and approval of the
examination and approval authority.
14.2 If one Party wishes to assign, or otherwise transfer all or any part of
its share of the registered capital to a third party, the other Party
shall have a preemptive right to purchase the interest to be assigned on
terms and conditions no less preferential than those offered to the third
party; the other Party shall exercise such preemptive right within sixty
(60) days after receipt of notice of such assignment or transfer
(including name of transferee, proposed sales price and proposed terms),
otherwise such right shall be deemed forfeited and the Party shall be
free to assign or otherwise transfer its share of the registered capital
to such third party within another sixty (60) days at a price not less
than the offered price.
Any assignment or transfer in violation of this Article shall render such
assignment or transfer invalid.
14.3 In the event that:
-- 50% or more of the share of either Party is acquired by a third party;
or
-- substantially all of the assets of either Party are acquired by a
third party; or
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-- a competitor of a Party owns or exercises voting control of over 15%
of the shares of such Party; or
-- a Party merges with or into another entity in a transaction in which
such Party is not the surviving corporation.
then the other Party shall have the right to purchase all (but not
less than all) of the shares of JVC held by such Party and such
Party shall be deemed to have consented to such purchase.
14.4 No sale, assignment, mortgage, pledge or other transfer of an interest in
JVC under this Article shall become effective until all necessary
approvals in form and substance, acceptable to the Parties; have been
obtained.
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CHAPTER 6 Responsibilities of the Parties
ARTICLE 15
In addition to the Parties' joint responsibility to work to attain the goals of
JVC, each Party shall be responsible for the following matters and activities.
15.1 Party A shall be responsible for:
(1) Making its capital contribution in accordance with the Contract;
(2) Provide services as specified in Annex L;
(3) Preparing and submitting applications for and procuring all relevant
PRC approvals and authorizations required in connection with the
share transfer, expansion of registered capital, modifications to
the JVC Contract and Articles of Association, as well as
corresponding changes to the registration and operation of JVC, all
which may from time to time be required, provided that Party A shall
inform Party B and provide Party B with copies of all relevant
approval documents and only if the terms are satisfactory to both
Parties, proceed with necessary measures; and conducting effective
liaison with relevant Chinese departments as required on all other
matters relating to the establishment and all subsequent activities
of JVC.
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(4) Make efforts in preparing and submitting applications for and
procuring Foreign Exchange Registration Certificate for JVC issued
by the State Administration of Exchange Control, and the
Confirmation Certificate from the relevant PRC Foreign Economic
Relations and Trade Department certifying that JVC qualifies as and
receives special preferences granted to Technologically Advanced
Enterprises according to the "Provisions of the State Council of the
People's Republic of China for the Encouragement of Foreign
Investment", dated October 11, 1986 (hereinafter "Encouragement
Provisions"), as supplemented, and receives all further preferences;
(5) Obtaining for JVC the land use rights for the Site described in
Annex H in accordance with the conditions described in Annex H;
(6) Assist in obtaining and securing the normal supply for JVC of
electricity, gas, telecommunication, water and heating necessary for
the operation of JVC and make efforts to obtain it at no higher cost
than that paid by state-owned enterprises in Shanghai;
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(7) Assist in obtaining for JVC all possible customs and tax exemptions,
reductions or rebates, and all other benefits, preferences and
protections to which it is or may in the future be entitled;
exerting its best efforts to obtain for Party B or its employees all
tax exemptions or reductions to which Party B or its employees,
respectively, are or may be entitled as set forth in Articles 40 and
41;
(8) Assisting JVC's foreign personnel in obtaining relevant entry and
exit and work permits and to facilitate their travel and living
arrangements in China, if necessary;
(9) Exerting its best effort to arrange for PRC bank loans in the name
of JVC, if required;
(10) Handling all other matters entrusted to it through the Contract.
15.2 Party B shall be responsible for:
(1) Making its capital contribution in accordance with the Contract;
(2) Provide technical services and transferring the right to use certain
trademarks as specified in the Technical Engineering, Consultant,
Services & Training Agreement (Annex I2) and the Trademark and Name
License Agreement (Annex J2);
(3) Exerting its best efforts to arrange for foreign bank loans in the
name of JVC, if required;
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(4) Assisting the Chinese staff and other service personnel of JVC to
apply for and obtain entry visas for Germany, if necessary, and to
facilitate their travel and living arrangements in Germany, if
necessary.
(5) Assisting JVC to import necessary machinery, equipment and parts.
(6) Handling all other matters entrusted to it through the Contract.
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CHAPTER 7 Board of Directors
ARTICLE 16
The members of the Board of Directors of JVC shall be designated by the Parties,
and the Board of Directors thereby be established, no later than the date of
issuance of the Revised Business License of JVC.
ARTICLE 17
The Board of Directors shall consist of five (5) Directors, of which two (2)
Directors shall be appointed by Party A and three (3) Directors appointed by
Party B. The Chairman of the Board shall be appointed by Party B, the
Vice-Chairman by Party A. The term of office for each Director shall be four (4)
years unless replaced earlier, and any Director may be reappointed or replaced
at any time by the Party which originally appointed him.
ARTICLE 18
The Board of Directors shall be the highest organ of authority of JVC and shall
decide all major policy issues of JVC. The matters to be discussed and decided
by the Board of Directors, its authority and rules of procedure shall be
stipulated in the Articles of Association.
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ARTICLE 19
The Chairman of the Board is the legal representative of JVC and its Chief
Executive Officer. Between the Board meetings Chairman shall have the right to
supervise the activities of the management office in order to get this Contract
and the decisions of the Board implemented appropriately and shall have the
right to give respective orders to the management office. Subject to the second
sentence of this Article 19, the Chairman of the Board may not unilaterally take
any action binding the Board of Directors of JVC without prior authorization of
the Board of Directors. Should the Chairman of the Board be unable to exercise
his responsibilities, he shall authorize the Vice-Chairman or any other Director
to represent JVC temporarily.
ARTICLE 20
The Board of Directors shall convene at least once every year. The meeting shall
be called and presided over by the Chairman of the Board. The Chairman of the
Board shall call and preside over a special meeting of the Board of Directors
after receiving the request made by any two (2) Directors.
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If the Chairman of the Board is unable to attend a meeting, he shall appoint the
Vice-Chairman to preside the meeting, and if the Vice-Chairman is unable to
attend, the Chairman shall appoint another Director to preside the meeting.
Notice of each Board of Directors meeting shall be given in writing and shall be
delivered by the Chairman of the Board to each Director not later than thirty
(30) days prior to the date set for such meeting. Minutes of all meetings in the
Chinese and English languages shall be placed on file and copies sent to each
Party within seven (7) days after each meeting. The meetings of the Board of
Directors shall generally be held at the legal address of JVC, unless otherwise
agreed by the Board of Directors.
A quorum of four (4) Directors is required for a meeting of the Board of
Directors, including at least one Director of each Party. If a quorum is not met
for a meeting, the Chairman shall call another meeting. If again no quorum is
met at such meeting, a quorum shall not be required if the Chairman so informed
all members of the Board of Directors when calling the meeting.
If any Director is unable to attend a meeting, he may by a written proxy
designate another person, including any other member of the Board or a third
person, to attend the meeting in his place and vote on his behalf.
The Board of Directors shall have the right to adopt resolutions without
meeting, pursuant to an unanimous written consent resolution of all Directors of
the Board.
The first meeting of the new Board of Directors of JVC with Party B as the
foreign Party shall be held within four (4) weeks after the issuance of the
business license of JVC.
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ARTICLE 21
Decisions made by the Board of Directors shall be valid only if they are agreed
upon by the majority of those Directors participating in person or by proxy. The
Board of Directors shall reach decisions on major policy issues through friendly
consultation on the basis of mutual benefit. The following major policy issues
must be unanimously agreed by the Directors attending the meeting of the Board
of Directors in person or by proxy:
(1) changes or amendment to the Joint Venture Contract or the Articles of
Association of JVC;
(2) termination or dissolution of JVC;
(3) any increase in the registered capital of JVC or assignment of a share of
such registered capital or a part thereof;
(4) merger of JVC with another economic entity;
(5) Approval of the important reports submitted by the General Manager;
(6) Approval of the annual financial reports, income and expenditure accounts,
profit and loss accounts, and to approve in accordance with Article 49.1
proposals for the distribution of the profits for the year;
(7) Decisions on establishing branch organizations;
(8) Decisions on any formation of joint ventures with any third party;
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(9) Approval of the salary of the high ranking administrative personnel of JVC.
Above decisions (1)-(4), as well as other items if required by concerned laws
and regulations, shall become effective only upon written agreement signed by
the Parties and approval by the examination and approval authority.
The following issues must be agreed by two thirds of the Directors attending the
meeting of the Board of Directors in person or by proxy:
(1) Price structure (but not the price level).
(2) Staff planning.
ARTICLE 22
22.1 The members of the Board of Directors shall not be entitled to any
remuneration. JVC, however, shall reimburse their expenses for attending
the board meetings including travel expenses, equal to the amount for
round trip travel expenses directly between their headquarters and the
location of the Board of Directors meeting, and accommodations.
22.2 No member of the Board of Directors shall have any personal liability for
any act performed in his capacity as Board member except for such acts as
would constitute violations of the laws of any jurisdiction to which JVC
or the relevant Board member is subject to.
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CHAPTER 8 Business Management
ARTICLE 23
JVC shall establish a management office which shall be responsible for its daily
management. The management office shall have a General Manager to be nominated
by Party A, and a Deputy General Manager to be nominated by Party B. If the
Chairman and the Vice Chairman decide a further deputy general manager (the
"Second Deputy General Manager") is needed he shall be nominated by Party A.
The General Manager and Deputy General Manager and, if nominated, the Second
Deputy General Manager shall be appointed by the Board of Directors and their
term of office shall be four (4) years. Each Party undertakes that its Board
members will vote on the appointment of the nominees of the other Party. The
Deputy General Manager may be renominated or replaced at any time by Party B.
The management office shall proceed in accordance with the Contract and the
Articles of Association.
ARTICLE 24
24.1 The General Manager shall have the responsibility of implementing the
general policies and decisions of the Board of Directors, and of
organizing and conducting the daily management of JVC and, within the
scope empowered to him by the Board of Directors, to represent JVC in
dealing with third parties.
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24.2 The Deputy General Manager shall work in close cooperation with the
General Manager and shall be responsible to and report to the General
Manager and the Board of Directors. The scope of management of the Deputy
General Manager shall be quality control, accounting, cost controlling
and export business if not otherwise decided by the Board of Directors.
In dealing with all important issues, the General Manager shall consult
and act in agreement with the Deputy General Manager. The Board of
Directors shall decide which important issues shall require the
signature of the General Manager and the Deputy General Manager. If the
Deputy General Manager is not in Shanghai, his consent shall be obtained
by telefax or his approval shall be obtained upon his return.
If the General Manager cannot exercise his responsibilities, he shall
authorize in writing the Deputy General Manager to represent him.
24.3 Within one hundred (100) days after the end of each fiscal year, the
General Manager and the Deputy General Manager shall jointly report to
the Board of Directors on the state of the business during such year and
submit a final audited annual financial report.
Within the exception of the Chairman's rights specified in Article 19 no
member of the Board of Directors shall interfere with the daily
management of the General Manager.
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ARTICLE 25
The General Manager together with the Deputy General Manager shall also have
the power to act on behalf of the Board of Directors in emergency situations in
which it is impossible to convene a meeting of the Board of Directors for
urgent decisions in time to prevent serious harm to JVC. Such event has to be
reported to the Board of Directors without delay.
ARTICLE 26
Within the management organization, departments shall be established if so
decided by the Board of Directors. Department managers shall be appointed if
and as necessary. The managers and deputy managers of the various departments
shall jointly be nominated by the General Manager and the Deputy General
Manager and the General Manager shall appoint them accordingly upon consent
obtained from the Board of Directors. The managers and deputy managers of the
departments shall be responsible for the work of the department concerned,
shall execute the tasks assigned by the General Manager and Deputy General
Manager, and shall be responsible to them.
ARTICLE 27
If the Board of Directors decides at any time that a Chief Accountant and Deputy
Chief Accountant and/or an outside Financial Advisor are required for JVC, they
shall jointly be appointed by the General Manager and the Deputy General
Manager.
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The Chief Accountant shall assist the General Manager and the Deputy General
Manager, shall be under their supervision and shall be responsible for the
financial and accounting work of JVC. He shall submit to the General Manager and
the Deputy General Manager an annual budget for each fiscal year, not later than
one hundred and twenty (120) days before the beginning of such fiscal year,
quarterly financial statements within fifteen (15) days and the unaudited final
annual financial reports within sixty (60) days after the end of the respective
quarter or year.
The outside Financial Advisor, if required, shall be responsible and report
directly to the Board of Directors and act according to instructions by the
Board of Directors. His role shall be limited to examination and supervision of
any and all financial aspects and accounts of the JVC and he shall not interfere
into the JVC's daily operation.
ARTICLE 28
Concurrently with the performance of their duties to JVC as provided herein, the
General Manager and the Deputy General Manager may not assume any other duties
of or participate in other economic organizations unless unanimously agreed by
the Board of Directors.
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ARTICLE 29
If the General Manager or Deputy General Manager incur liability toward third
parties they shall be indemnified by JVC except for intentional or gross
negligence or graft or serious dereliction of duties. The General Manager and
Deputy General Manager may be dismissed by the Board of Directors at any time,
for intentional or gross negligence or for graft or serious dereliction of
duties. Other senior management staff may be dismissed by the General Manager in
consent with the Deputy General Manager, with the approval of the Board of
Directors, at any time for graft or serious dereliction of duties.
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CHAPTER 9 Labor Matters
ARTICLE 30
Labor contracts covering the hiring of workers, their qualifications and
testing, employment, dismissals, resignation, salaries and wages, labor
insurance, welfare, rewards and bonuses, safety, labor discipline, and other
matters concerning the staff and workers of JVC shall be based on the "Labor Law
of the People's Republic of China" as supplemented, and other relevant rules
and regulations of the PRC and the Shanghai Municipal Government.
The JVC shall sign labor contracts with individual staff and workers and shall
submit them to the local labor management bureau for notification.
ARTICLE 31
JVC acting through its management office shall have the widest authority,
consistent with relevant promulgated laws and regulations of the PRC, to
implement modern methods of management and work performance control. This shall
include the power to dismiss workers and staff members as redundant and to
maintain labor discipline which shall include the power to criticize, educate or
take disciplinary actions extending to dismissal for cause against workers and
staff members for violation to the labor contract or other internal rules of
JVC.
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ARTICLE 32
The appointment of senior management personnel, their salaries, social
insurance, welfare and the standard of travel expenses shall be decided jointly
by the General Manager and Deputy General Manager upon prior consent having been
obtained from the Board of Directors.
Party B shall have the right to send to JVC and expatriate Deputy General
Manager if it considers this necessary.
If the expatriate Deputy General Manager is assigned by Party B, the JVC shall
bear the costs for the accommodation of this expatriate Deputy General Manager
in Shanghai; otherwise the remuneration of the General Manager and the Deputy
General Manager shall be the same.
If no expatriate Deputy General Manager is assigned by Party B and the Board of
Directors unanimously agrees that it is necessary to hire an expatriate Deputy
General Manager, his remuneration shall be in accordance with the conditions of
the relevant contract agreed with him and unanimously agreed by the Board of
Directors. The same applies with respect to other expatriate personnel.
Costs for personnel sent to JVC by Party B according to the Technical
Engineering, Consultant, Service & Training Agreement (Annex I2) shall be borne
by the JVC in accordance with the same Agreement (Annex I2).
Party A represents and warrants that it shall hold JVC harmless from all claims
arising out of any staff and worker's prior employment with Party A and from all
claims raised during the layoff of workers by Party A not taken over by JVC,
such as claims for placement fees.
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CHAPTER 10 Transfer of Technology
ARTICLE 33
Party A and Party B shall transfer free of charge to JVC necessary technology
and know-how relating to the manufacture, design, development and application of
certain further specified products (hereinafter the "Contract Products"), and
Party B shall provide against payment certain technical services as specified in
detail in the Technology Transfer Contract (Annex I1) and Technical Engineering,
Consultant, Assistance & Training Service Agreement (Annex I2).
ARTICLE 34
Party A and Party B shall grant to JVC the right to use trademarks for its
Products in accordance with the Technology Transfer Contract (Annex I1),
Technical Engineering, Consultant, Assistance & Training Service Agreement
(Annex I2) and Trademark and Name License Contracts, respectively, (Annex J1 and
Annex J2) upon registration of such trademark for Party B in the PRC.
JVC shall have the right to use the trademarks after the date of effectiveness
of the Trademark and Name License Contracts (Annex J1 and Annex J2) until
expiration or termination of such Contracts or the expiration of the
registration of the trademarks in the PRC, whichever is earlier.
JVC shall not develop or use its own trademark.
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If, at any time, Party B ceases to be a party to JVC, the Joint Venture shall no
longer be entitled to use Party B's trademark.
ARTICLE 35
The details of the transfer of technology and know-how and of further rights are
set forth in the Technology Transfer Contract (Annex I1), the Technical
Engineering. Consultant, Assistance & Training Service Agreement (Annex I2), and
the Trademark and Name License Contracts attached to this Contract as Annex J1
and Annex J2.
The term of the Technology Transfer Contract (Annex I1) and the Technical
Engineering, Consultant, Assistant & Training Service Agreement (Annex I2) shall
be ten (10) years.
ARTICLE 36
The transfer under the Technology Transfer Contract (Annex I1) shall be
non-transferable. The transfer under the Technical Engineering, Consultant,
Assistant & Training Service Agreement (Annex I2) shall be non-transferable.
The transfer, know-how, patents and trademark shall not be used except for the
manufacture and testing of the Contract Products by JVC under the Technology
Transfer Contract (Annex I1) and Technical Engineering, Consultant, Assistance &
Training Service Agreement (Annex I2).
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CHAPTER 11 Site, Buildings, Environment
ARTICLE 37
37.1 Party A shall transfer the ownership of the buildings to JVC as specified
in Article 10.1 and shall be responsible to lease to JVC in accordance
with the Agreement in Annex H the Land Use Rights and Premises as
described in Annex H.
37.2 JVC shall not be liable for and Party A undertakes to hold JVC harmless
from all claims raised against JVC arising from or in connection with
Party A's use of the Site described in Annex H as well as any buildings
on this Site prior to the establishment of JVC, such as, but not limited
to, environmental liabilities. Party A furthermore represents and
warrants that its use of the Site and buildings on the Site is in
compliance with all PRC laws and regulations and that the project as
contemplated in this contract and specified in the Feasibility Study
Report will, to the best knowledge of Party A, comply with all PRC
national and local laws and regulations including laws on environmental
liability.
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CHAPTER 12 Purchase of Assets, Services, Equipment and Materials
ARTICLE 38
38.1 In addition to Party A's capital contribution specified in Article 10.1,
Party A shall provide certain services as specified in Annex L.
38.2 In its purchase of required machinery, equipment, parts and materials JVC
shall give priority to Chinese domestic sources whenever items from such
sources are - in the joint opinion of the General Manager and Deputy
General Manager - competitive with like imported items with respect to
quality, price, delivery, other commercial terms, sampling of materials
and technical and commercial qualifications of supplies.
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CHAPTER 13 Sale of Products
ARTICLE 39
39.1 It is the agreed plan that the Products of JVC shall be sold on the PRC
market and the international market. As the Exclusive Distributor of the
JVC's Products in the international market per Annex K, Party B shall
make greatest effort to develop the international market after the
Product quality has reached IKS standard and the Products' prices have
achieved the competitiveness required in the international market.
"Competitive prices" as mentioned before are prices charged to IKS by
suppliers not controlled by IKS.
39.2 Products sold on the PRC market shall be sold directly by JVC. JVC shall
be free to determine the sales prices for the Products.
39.3 Any sales of Products or parts thereof on or for the market outside the
PRC and/or in Taiwan Sales Area, Hongkong Sales Area and Macao Sales
Area, either directly or indirectly, shall be handled exclusively through
Party B or Party B's international distribution network (as specified in
Annex K Export Sales Contract).
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If such right of exclusivity of Party B is violated directly or
indirectly by JVC, Party B shall have the right to terminate the Joint
Venture, and/or demand penalty payments in the amount of Five Hundred
Thousand US Dollars (US $ 500,000.00) and/or to demand compensation for
all direct and indirect damages and losses from JVC. The burden of proof
is with JVC that any entering of Products or parts thereof not sold to
Party B under the Export Sales Contract on the non-PRC market, including
Taiwan Sales Area, Hongkong Sales Area and Macao Sales Area is not due to
JVC. Any proceeds deriving from sales in violation of this clause shall
be handed over to Party B if not otherwise agreed between the Parties.
If JVC sells Products or parts thereof on the PRC domestic market, it has
the obligation to inform any domestic purchaser of Products of such
exclusive right of Party B and to ensure that any such third party is
honoring such right of exclusivity.
39.4 JVC shall undertake greatest efforts to achieve the domestic sales target
during the first five years as listed below. As the Exclusive Distributor
of the JVC's Products in the international market per Annex K, provided
the JVC's Product quality has reached IKS standard, and their prices have
achieved the competitiveness required in the international market, per
Annex K EXPORT SALES CONTRACT. Party B shall undertake greatest efforts
to make the JVC achieve the export targets during the first five (5)
years listed as follows.
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Year 1 2 3 4 5
---- ------ ------ ------ ------ ------
Domestic Sales Target 20,696 21,651 22,598 22,598 22,598
(Unit: RMB Million)
------ ------ ------ ------ ------
Export Sales Target 4,001 13,000 16,000 16,000 16,000
(Unit: RMB Million)
------ ------ ------ ------ ------
Total Sales 24,696 34,651 38,598 38,598 38,598
====== ====== ====== ====== ======
If the actual export achievements through Party B fall substantially
lower than the above export target, the Board of Directors can decide the
method and arrangements for a certain amount of Products to be directly
sold by the JVC to markets outside the China Sales Area.
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CHAPTER 14 Taxes, Finance, Audit, Profits and Foreign Exchange
ARTICLE 40
JVC shall pay taxes in accordance with the stipulations of Chinese national laws
and regulations, provisions of the Shanghai Municipal Government and other
relevant rules and regulations.
Party B's share of profit and other income shall be exempted from taxation in
accordance with the "Foreign Investment Enterprises and Foreign Enterprises Tax
Law of the People's Republic of China", as supplemented, and other relevant
rules and regulations.
JVC shall apply for any exemptions from or reductions in customs duties or taxes
which current or future national or local laws, regulations and practice may
permit.
ARTICLE 41
Staff members and workers of JVC shall pay individual income tax according to
the "Individual Income Tax Law of the People's Republic of China", as
supplemented, and relevant treaties for the avoidance of double taxation in
effect between the PRC and other countries.
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ARTICLE 42
Allocations for reserve funds and expansion funds of JVC and for funds for
welfare and bonuses for staff and workers shall be set aside in accordance with
the stipulations in relevant laws and regulations. The annual proportion of
allocations shall be decided by the Board of Directors according to the business
situation of JVC. Once the cumulative amount allocated to the reserve and
expansion funds reach fifty percent (50%) of the registered capital, no further
allocations shall be made.
Guidelines on the use of before mentioned funds shall be decided by the Board
of Directors. The specific use shall be decided by the General Manager together
with the Deputy General Manager in accordance with such guidelines.
ARTICLE 43
The fiscal year of JVC shall be the calendar year, from January 1st to December
31st, whereas the first fiscal year shall commence on the date of issuance of
the Revised Business License and end on the following December 31. Besides the
financial statements forms printed by the JVC, and menu, layout and forms of
computerized accounting programs, and financial monthly and other reports
prepared for the Board of Directors which shall be in corresponding Chinese and
English, all other vouchers, receipts, financial, statistical and other reports
and account books prepared by JVC shall be written in Chinese and gradually
written in corresponding Chinese and English. Upon request by Party B, JVC shall
prepare further documents in English.
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ARTICLE 44
44.1 The financial and accounting system to be adopted by JVC shall be in
accordance with international accounting standards and relevant laws,
regulations and rules of the PRC governing finance and accounting systems
and shall be reported to the relevant financial and tax bureaus. JVC's
accounts shall be kept in Renminbi. However, the equivalent in US Dollar
shall be indicated in all computerised accounts and printouts and any
financial accounts reported to Party B or the Board of Directors. The
exchange rate between Renminbi and US-Dollar shall be in accordance with
the official exchange rate of the PRC on the last day of the month
preceding the relevant entry.
44.2 JVC shall open with a bank authorized to do business in the PRC. Renminbi
and foreign exchange accounts on the strength of its Foreign Exchange
Registration Certificate. If necessary and permitted by the relevant PRC
authorities it shall also open accounts with a bank/banks outside the
PRC.
ARTICLE 45
JVC shall submit to the Parties monthly and quarterly financial statements in
Chinese and English language within ten (10) days after the end of the
respective month, within fifteen (15) days after the end of the respective
quarter, and audited annual financial statements within one hundred (100) days
after the end of each fiscal year. The unaudited annual financial statements
shall be submitted to the Board of Directors within sixty (60) days after the
end of each fiscal year.
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ARTICLE 46
Financial audits and examination of JVC shall be conducted by certified public
accountants registered in the PRC from an internationally recognized firm of
certified public accountant (Ernst & Young if not otherwise decided by the Board
of Directors) and reports of the results thereof shall be prepared in Chinese
and English language and submitted to the Board of Directors and the Parties.
Each Party is entitled to designate duly authorized personnel to inspect at any
time the books of JVC at the expense of such Party.
ARTICLE 47
Within the first one hundred (100) days of each fiscal year, the General Manager
and the Deputy General Manager shall jointly prepare a proposal regarding the
disposal of profits and submit it to the Board of Directors for examination and
approval.
ARTICLE 48
48.1 All matters concerning foreign exchange transactions of JVC shall be
dealt with in accordance with the "Interim Regulations of the People's
Republic of China on Foreign Exchange Control" and other relevant laws
and regulations in effect.
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48.2 With respect to the foreign exchange balance of JVC, the following is the
understanding of the Parties: Necessary foreign exchange income to cover
foreign exchange expenses of JVC shall be obtained as follows:
(1) Exports of Products as specified in this Contract;
(2) Sale of Products on the PRC market for foreign exchange, if in the
future permitted by PRC law;
(3) Exchange of Renminbi income of JVC for foreign exchange at
authorized banks and/or foreign exchange adjustment centers
(swap-centers) in the PRC with the necessary approval of the
relevant departments.
48.3 Foreign exchange income shall be used according to the following priority
payments:
(1) imports of machinery, equipment, parts;
(2) technical services or license fees;
(3) principal and interest on foreign exchange loans;
(4) compensation for expatriate personnel;
(5) dividends of Party B.
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48.4 If, as a consequence of modifications in the currency system of the PRC
at any time throughout the duration of JVC, other or additional
restrictions on the convertibility of Chinese currency come into force or
the exchange of Chinese currency for foreign exchange at banks or swap
centers is restricted, abolished or modified, Party A shall use its best
efforts to ensure that JVC is able to make all payments which it is
required to make in foreign exchange, and shall exert its best efforts to
ensure that profits distributed to Part B and all other payments to be
made to Party B are made in foreign exchange or in Renminbi readily
convertible into foreign exchange which Party B may freely repatriate.
ARTICLE 49
49.1 JVC's annual profit shall be subject to taxation in accordance with
relevant laws and as specified in Article 40. After making allocations to
reserve funds, expansion funds and funds for staff and worker welfare and
bonuses under Article 42, the Board of Directors shall declare the
remainder as net profit for that year, which shall be declared and paid
to each Party within one hundred and fifty (150) days after the close of
the previous fiscal year according to the proportion of the shares in the
registered capital of each Party as of the close of the previous fiscal
year if no other method or Schedule is decided by the Board of
Directors. In general all profit shall be distributed. An unanimous
decision by the Board of Directors is required if profits shall not
completely be distributed.
If dividends are distributed, any foreign exchange profits shall first be
used to pay Party B's share of profit and only the remainder, if any, be
used to pay Party A's share of profit.
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49.2 If in any fiscal year the JVC does not have sufficient readily
convertible foreign exchange funds to pay Party B its full share of
profit. Party B shall have the option to take part of its profits for the
fiscal year in Renminbi and/or to defer receipt of the remaining portion
designated by Party B. Party B shall receive such remaining portion at
such time as Party B may elect, and such portion (or part thereof) shall
be paid to Party B in readily convertible foreign currency to the extent
such funds are held by the JVC.
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CHAPTER 15 Insurance
ARTICLE 50
Insurance policies of JVC on various risks customarily insured against by
businesses whose premises and operations are comparable to those of JVC shall be
underwritten with an insurance company authorized to do business in the PRC.
Types, value and duration of any insurance shall be decided by the Board of
Directors.
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CHAPTER 16 Duration of JVC
ARTICLE 51
The duration of JVC shall be fifty (50) years, commencing from the date of
issuance of the Revised Business License.
Any application for extension of the duration of JVC shall be agreed by the
Parties and an application be submitted to the examination and approval
authority at least six (6) months prior to the expiration of JVC.
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CHAPTER 17 Amendment and Termination of the Contract
ARTICLE 52
Any amendment or alteration made by the Parties in writing shall form an
integral part of the Contract.
Any major amendments or alterations of the Contract or its Annexes shall require
the unanimous approval by the Board of Directors and shall become effective only
after a written agreement signed by the Parties has been approved by the
examination and approval authority.
ARTICLE 53
53.1 The Parties agree that only if any of the following conditions arises,
the Contract may be terminated by either Party prior to its stated
expiration date by written notice of its authorized representative to the
other Party and each Party shall cause its nominees to the Board of
Directors to vote in favor and to submit an application for dissolution
to be approved by the examination and approval authority:
(1) if JVC is unable to continue operations due to the failure of one
Party to fulfill its obligations under the Contract within sixty
(60) days after receiving written notice from the authorized
representative of the other Party;
(2) if JVC is unable to continue operations for a period of six (6)
months due to an event of force majeure, as defined in Article 57 of
the Contract;
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(3) if the Board of Directors decides that the JVC is unable to attain
the objectives stated in the Contract or the Feasibility Study and
has no reasonable prospects for development;
(4) if a petition for bankruptcy proceeding, compulsory settlement or
liquidation is filed for either Party, the other Party may terminate
this Contract within sixty (60) days of knowledge of such event;
(5) if the ownership in Party A changes to the extend that any entity in
competition to Party B maintains an economic interest in Party A,
Party B may terminate the Contract within sixty (60) days of
knowledge of such event;
(6) if the land use rights obtained by JVC for the Site described in
Annex H2, shall end before expiration or termination of the Contract
or the term specified in Annex H, Party B may terminate the Contract
within sixty (60) days of knowledge of such event;
(7) if the assets of JVC are expropriated or requisitioned;
(8) if JVC fails to make payments to or distribute profits to Party A
and Party B within ninety (90) days after the relevant payment
becomes due;
(9) if the Parties mutually agree to terminate the Contract.
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(10) if any items to be imported out of the total amount of investment
become subject to any PRC taxes, customs duties or other levies
Party B may terminate the Contract within sixty days of knowledge of
such event.
53.2 Termination of the Contract shall be without prejudice to the accrued
rights and obligations of the Parties, including, but not limited to,
claims of damages directly caused by the failure of a Party to fulfill
its obligations under the Contract.
53.3 Upon termination of the Contract due to Contract violation by one of the
Parties, the non-violating Party shall be entitled to acquire the
violating Party's share or to sell its share to the violating Party or a
third party, at a price determined according to the fair market value
within twelve (12) weeks after the date of the termination notice. The
fair market value shall be determined by the balance sheet data,
multiplied by the selling Party's percentage share of the registered
capital, plus an additional payment reflecting the going concern of JVC
based on its actual circumstances taking into account market value of
similar companies. If the Parties cannot agree on such fair market value
it shall be determined by two (2) certified public accountants, one
appointed by each Party. Each purchase as mentioned before shall be
approved by the relevant PRC authorities.
53.4 The Board of Directors shall only meet and vote on the dissolution after
the timeframe indicated in Article 53.3 has expired.
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The Party objecting to the dissolution shall be obliged to purchase the
other Party's share at a price specified in Article 53.3.
53.5 Upon expiration or termination of the Contract the relevant provisions of
the Contract shall remain applicable up to the settlement of claims
arising from or in connection with this Contract.
ARTICLE 54
Upon expiration of this Contract or its early termination pursuant to Article
53.1 the Board of Directors shall appoint a Liquidation Committee according to
the Articles of Association.
The tasks of the Liquidation Committee are: to conduct a thorough check of the
property of JVC, its creditors, rights and liabilities, to work out the
statement of assets and liabilities and the list of property, to put forward a
basis on which property is to be evaluated and calculated based on the market
value including intangible assets such as the going concern value of JVC, and to
formulate a liquidation plan. All these shall be carried out upon approval of
the Board of Directors.
During the process of liquidation, the Liquidation Committee shall be the legal
representative of JVC.
JVC shall be liable for its debts with all its assets.
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The Liquidation Committee shall solicit offers for selling the interests of the
Parties, the business of JVC, or assets of JVC.
The remaining property after the clearance of all debts shall be distributed
between the Parties according to the proportion of each Party's share to the
actually paid registered capital; all payments to be made to Party B shall be
made in US-Dollar and all payments to Party A shall be made in Renminbi or
foreign exchange, if available, according to the official exchange rate
published at the date of payment and the beneficial party shall undertake any
currency conversion losses and handling charges involved in currency conversion
for such payment purpose.
Upon expiration or early termination of this Contract prior to the expiration of
the Technical Engineering, Consultant, Assistance & Training Service Agreement
(Annex 12), all technical documentation, Technical Data and drawings transferred
by Party B to JVC during the duration of JVC and all copies thereof shall be
freely and with no restrictions returned to Party B and Party A shall not
manufacture products according to these documents.
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CHAPTER 18 Liabilities for Breach of the Contract
If a Party fails to pay all or part of its capital contribution when due in
accordance with the Contract, such Party shall pay as compensation for default
to JVC three percent (3%) per month of the amount or portion thereof or of the
value of the assets it has not contributed commencing from the first day of the
month following the date such contribution was due. Notwithstanding such
compensation for default, the non-defaulting Party may serve notice on the other
Party requiring rectification of such defaults within thirty (30) days of
receipt of notice. If, after expiry of such period, no resolution of default or
no other agreement has been reached by the Parties, the non-defaulting Party may
give notice to the other Party that it wishes to dissolve JVC or that it wishes
to purchase the other Party's share of the capital or part thereof in relation
to the defaulted capital contribution and the other Party hereby agrees to such
purchase.
56.1 The Party that fails to fulfill all or part of its obligations under the
Contract or its Annexes shall bear the losses directly caused to JVC by
such failure. Should such failure be attributable to the fault of both
Parties, they shall be liable therefore according to their respective
degree of fault.
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56.2 A failure or delay by one Party to require the enforcement on any
provision of this Contract shall not be construed as a waiver by such
Party of any of its rights nor shall it affect the validity of this
Contract or any provision therefore at any time thereafter.
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CHAPTER 19 Force Majeure
ARTICLE 57
If either Party has been prevented from performing its obligations under the
Contract because of an event of force majeure such as earthquake, storm, flood,
fire, other acts of nature, epidemic, war, riot, hostility, public disturbance,
acts of public enemies, prohibition or acts by a government or public agency,
strikes or other labor disputes or work stoppage, or other events beyond the
control of the Party, and their occurrence is unpreventable and unavoidable, the
Party so prevented shall notify the other Party by telefax, telex or cable in
writing within fourteen (14) days after the occurrence of such event of force
majeure, act to mitigate damages, if possible, and within thirty (30) days
thereafter provide detailed information of the event, a certificate of evidence
thereof issued by the relevant authorities and a statement explaining the reason
for its inability to perform all or part of its obligations under the Contract.
If an event of force majeure occurs, neither Party shall be responsible for any
damage, increased costs or loss which the other Party may sustain by reason of
such failure or delay of performance. The Party claiming force majeure shall
take appropriate measures to minimize or remove the effect of force majeure and,
within the shortest possible time, attempt to resume performance of the
obligation(s) affected by the event of force majeure.
The Parties shall, through consultations, decide whether to modify or terminate
the Contract according to the effects of the event of force majeure.
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CHAPTER 20 Applicable Laws
ARTICLE 58
The formation of the Contract, its validity, termination, interpretation,
execution and settlement of any disputes arising thereunder shall be governed by
the promulgated and publicly available laws and regulations of the PRC, provided
that if no promulgated and publicly available Chinese law governs a particular
issue, reference shall be made to generally accepted international practice.
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CHAPTER 21 Confidentiality and Exclusivity
ARTICLE 59
59.1 For the duration of this Contract and thereafter, the Parties shall keep
the content of this Contract, their negotiations and their project
including information relating to management methods, technology,
know-how, client lists, sales and marketing plans and data and financial
affairs (hereinafter "Confidential Information"), confidential and shall
not disclose any part thereof to any entity or third party, except as
required to obtain relevant government permits or licenses and except if
prior written permission has been obtained from the other Party; the
Parties shall take all necessary care to prevent third parties from
obtaining knowledge or making use in any way of Confidential Information.
59.2 Upon establishment of JVC, confidentiality and non-competition contracts
shall be signed by JVC with all employees, staff and workers working for
JVC.
59.3 Party A undertakes for the duration of this Contract that it will not
develop or produce any Products of the JVC or Contract Products or
products similar thereto, or parts thereof and will cause its affiliates,
subsidiaries or parent company not to do so. However, Party A may
continue to manufacture and sell products listed in Annex N hereto.
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Party B shall not participate in any further joint venture company manufacturing
Products or Contract Products within the PRC (except in Harbin, Dalian or other
cities unanimously permitted by the Board of Directors).
If Party A or Party B violates this provision the violating Party shall pay a
penalty of US Dollar one million (US$1,000,000) to JVC for each such case of
violation.
59.4 Unless otherwise required by law any public statement or other public
announcement relating to the establishing or operation of JVC shall be
jointly decided by the General Manager and Deputy General Manager upon
consultation with the Board of Directors.
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CHAPTER 22 Settlement of Disputes
ARTICLE 60
All disputes arising from the execution of, or in connection with, the Contract
shall be settled through friendly consultation between the Parties.
If no settlement can be reached through consultation within ninety (90) days
after either Party has given written notice to the other Party of the existence
of a dispute under this Article, the dispute may be submitted to arbitration
with the Institute of Arbitration of the Stockholm Chamber of Commerce according
to the arbitration rules of said institute by three arbitrators. The place of
arbitration shall be Stockholm. The language of the arbitration shall be
English. The arbitral award shall be final and binding on both Parties.
During the arbitration proceeding, the Contract shall continue to be executed by
the Parties except for the part which is under arbitration.
In any arbitration proceeding, any legal proceeding to enforce an arbitral award
and in any other legal action between the Parties relating to this Contract,
each Party expressly waives the defense of sovereign immunity and any other
defense based on the fact or allegation that it is a political subdivision,
agency or instrumentality of a sovereign state.
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CHAPTER 23 Effectiveness of the Contract and Miscellaneous
ARTICLE 61
This Contract shall be written in Chinese and in English versions, with eight
(8) sets of each version, and with Party A holding six (6) sets, and Party B
holding two (2) sets. The English language version and the Chinese language
version shall be equally binding.
Party B is entitled at any time to require that any document which is produced
in Chinese shall be translated into English at the expenses of JVC.
The Parties acknowledge that the Feasibility Study Report made up and agreed by
the Parties is a document made purely to determine the feasibility of the joint
venture cooperation between the Parties. Nothing contained in the Feasibility
Study Report shall be construed as a warranty, representation or undertaking by
a Party. All warranties, representations or undertakings by a Party shall, in
order to be valid, be made in this Contract.
ARTICLE 63
The following Annexes to the Contract shall become integral parts of the
Contract:
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No. of Pages/
Each Annex
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Annex A Registration Certificate of Party A 2
Annex B Registration Certificate of Party B 2
Annex C Articles of Association 46
Annex D Party A's Capital Contribution 15
Annex E Party B's Capital Contribution 2
Annex F List of Items Imported Out of the Total
Investment 1
Annex G Product Line 20
Annex H Site and Conditions 2
Annex I1 Technology Transfer Contract (Party A/JVC) 20
Annex I2 Technical Engineering, Consultant, Assistance &
Training Service Agreement (Party B/JVC) 58
Annex J1 Trademark License Contract (Party A/JVC) 12
Annex J2 Trademark and Name License Contract (Party
B/JVC) 15
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Annex K Export Sales Contract 41
Annex L Service Agreement 13
Annex M List according to Article 59.3 of this
Contract 4
In case of any discrepancies within the Contract and its Annexes and the
Feasibility Study Report, the Contract shall have priority.
ARTICLE 64
The Contract shall become effective upon the date of issuance of an appropriate
approval document by the examination and approval authorities approving this
Contract as agreed by the Parties (herein after referred to as the "Effective
Date").
ARTICLE 65
If any part of this Contract shall become void or invalid by virtue of law or
government order, the remaining parts shall stay valid and the Contract shall
be fulfilled by the Parties in accordance with its general principles, and the
void or invalid provision(s) shall be replaced by such valid provision(s)
reflecting closest the intentions of the Parties at the time of signing the
Contract.
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ARTICLE 66
Communications between the Parties and notices shall be sent by one Party to the
other by telegram, telefax, telex or express mail to the Parties' addresses set
forth in Article 1. unless a change of address of one Party has been notified to
the other Party in writing with reference to Article 1. Should notices in
connection with any Party's rights and obligations be sent by telegram, telefax
or telex, written letter notices shall be also required afterwards.
ARTICLE 67
Each Party shall bear its own expenses incurred in connection with the
negotiation and conclusion of this Contract.
ARTICLE 68
If there is any conflict between the Contract and any laws or regulations
promulgated after signing of the Contract, the Parties may in accordance with
Article 40 of the Foreign Economic Contract Law of the PRC, either continue to
fulfill the Contract or apply the provisions of such laws and regulations. If
the economic benefits under this Contract to either Party as set forth in the
Feasibility Study Report are substantially affected in an adverse manner after
the Effective Date due to the operation or interpretation of laws and
regulations of the PRC or government orders, policies or decisions, the Parties
shall renegotiate the relevant terms of this Contract in order to maintain such
benefits to the affected Party.
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ARTICLE 69
The Contract is signed by Shanghai, by the authorized representative of both
Parties on September 24, 1995.
Shanghai Printing & IKS Klingeinberg Far East
Packing Machinery GmbH
General Corporation
Auth.Rep.: Xx Xxxxx An Auth.Rep.: Xxxxxx Xxxxx
Position: General Manager Position: Managing Director
Signature: Signature:
Date: 24-9-95 Date: 24-9-95
