Exhibit 10.1
Joint Venture
Xxxxxx Xxxxxxxxxxx Biology Science and Technology Industry, Ltd
Article of Association
No. 1 General Rules
a) Based on Joint Venture Enterprise Law of People Republic of China, Santai
Science and Technology Industry, Ltd (Party A) and American Dairy (Party B)
signed the Contract at Shenzhen on 10/14/2003 to form the Joint Venture,
Xxxxxx Xxxxxxxxxxx Biology Science and Technology Industry, Ltd, and set up
the Article of Association. This Association is aimed to clarify the
Contract, explain the fulfillment of the Contract, and pursue the
satisfactory and the max profit permitted in the scope of business.
b) Chinese name of the joint venture: Xxxxxx Xxxxxxxxxxx Biology Science and
Technology Industry, Ltd. English name of the joint venture: Xxxxxx
Xxxxxxxxxxx Biology Science and Technology Industry, Ltd.
c) Address: 00 Xxxxxxx Xxxxxx, Xx xxxx Xxxxxx, XXX
d) Name of Party A, B and Address: Party A: Santai Science and Technology
Industry, Ltd, Address: 00 Xxxxxxx Xxxxxx, Xx xxxx Xxxxxx, XXX Party B:
American Dairy, Address: 000X Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000
e) Joint venture is Chinese Legal Person, is protected and ruled by laws in
China. All its activities must comply with the relating regulations.
No. 2 General Purpose, Scope of Business
2.1 General Purpose: take advantage of the advanced deep processing technology,
produce walnut product and sell 100 million RMB each year, benefit the
Party A and Party B, and the whole society.
2.2 Joint venture scope of business: produce, sell deep processing walnut
product, provide after-sales service, research and develop new product.
2.3 Joint Venture will sell the product to both domestic and international
market, the sales percentage and quantity is: 2004 30% to international
market and Hongkong and Maco area 70% to domestic market 2005 35% to
international market and Hongkong and Maco area 65% to domestic market
No. 3 Total investment and registered capital
3.1 Joint Venture total investment is RMB 3,330,000
Joint Venture total registered capital is RMB 3,330,000
3.2 Capital offered by Party A and B:
Party A invested RMB 1,330.000, 40% of the total registered capital
Party B invested RMB 2,000,000, 60% of the total registered capital.
3.3 Party A and B should provide the full amount of their quote by the time
determined in the Contract. After that, the Joint Venture will hire the
qualified accountant to audit and furnish the written investment
certificate, which shows: the name of the Joint Venture, date of
association, amount of the registered capital and provider name, date to
register the capital, date of this certificate. If either party wants to
transfer his shares, no matter part or all of them, the transfer will be
subject to the agreement of the other party, and the other party has the
privilege to buy over the third party.
3.4 Increase, decrease or transferring of the registered capital must be
approved by the Board unanimously, and subject to agreement of the original
authority approving the business. After the approval, the new procedure for
the modification should be reported to the original record keeping
authority.
3.5 Joint Venture should open the account both for RMB and foreign currency in
the bank registered in China. If because the Joint Venture will sell and
provide the service in the international market, and decides to open the
account in the bank outside China, permission from the Foreign Currency
Administration Department is needed before the start of the relating
process.
3.6 During the Contract period, if the Board decides to apply bank loan either
to domestic or international bank, manager will follow the decision from
Board. Without the written agreement of the other party, neither party
could collateralize his own property or the Joint Venture capital.
No. 4 Board of Directors
4.1 Joint Venture has Board of Directors, which is the most powerful unit in
the organization.
4.2 BOD will determine all the major issues for the Joint Venture with the
following rights:
a. Determine and approve all the following provided by general manager:
the production plan, annual operation report, cash flow, budget on the
revenue and expense, financial statement, annual profit distribution,
loan plan
b. Modify the article of association
c. Set up the subsidiary
d. Make the decision on expand, shrinkage, termination of the contract,
or merge to another economic entity.
e. Hire or fire the general manager, general engineer, general accountant
and auditor, determine their compensation
f. Approve all the major regulations of the company g. Investigate all
the important lawsuit or arbitration issue related to Joint Venture
h. Be responsible for the liquidation when Joint Venture terminates.
i. Discuss and determine all the other major issues that is within the
scope.
4.3 BOD is composed of 5 members, 2 are from Party A, and 3 are from Party B.
BOD is in a period of 3 years and could be reelected if approved. Within
the period, BOD members are not allowed to resign without reasonable
reasons.
4.4 Chairman of the Board must be from Party B, vice chairman of the Board is
from Party A. Both Parties must notify the other party when they need to
change the Board members.
4.5 There should be at lease one board meeting each year. Temporary board
meetings could be held if approved by more than one-third members. Board
meetings usually will be held where the company locates.
4.6 Chairman of the BOD will call and preside the meetings. Under special
circumstances, if the chairman could not preside the meeting, the member
designated by the chairman should take over the responsibility. If chairman
did not designate anyone, the vice chairman will do.
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4.7 Board members could proxy someone else to attend the meeting if they could
not attend for some reasons. If the members from one party or several
parties didn attend the meeting, nor did they designate anyone else to
attend, so that the board meeting could not make the decision on the legal,
regulations and major issues listed in the Article for more than 10 days,
then other parties should notify in written the members not attending the
meetings and the parties they are from, to the legal address to urge them
to attend.
Board meetings should be held only when there are more than 3 members
(two-thirds of the board) to attend, each has one voting right.
4.8 The above written notice to urge the members should be sent out in
registered mail 60 days before the meeting, and should specify the receiver
to reply in written within 45 days of this notice whether or not the
receiver will attend the meeting. If within the time, the receiver won
reply, it is deemed that he gives up the right. And then the members from
the party who sent out the urge mail could have a special Board meeting.
Even if the Board members are not enough for the Board meeting, upon the
unanimous agreement of the members attending the meeting, the decision made
in this meeting is still effective.
Company will assume all the board meeting expenses.
4.9 Board members not working for the Company is not compensated by the
Company.
4.10 There should be detail minute for each Board meeting, signed by each member
and proxy attending the meeting. Minutes is recorded in Chinese, and kept
in file by Company.
4.11 The following should be unanimous approved by the Board:
a. Modify the article of association
b. Dissolve or terminate the Joint Venture
c. Increase, decrease or transfer registered capital
d. Merge or split off
e. Transfer shareholder rights
f. Mortgage shareholder rights
g. Mortgage company capital
h. Adjust the company capital
i. Hire or fire the general manager, general engineer, general accountant
and auditor, and determine their compensation
4.12 The following should be approved by two-thirds of the Board members
a. Approve the production plan, annual production report, financial
reports, annual profit distribution plan
b. Approve the internal control operation
c. Approve the general administrative regulations
d. Investigate the lawsuit and arbitration issue related to the Joint
Venture
No. 5 Administration
5.1 Joint Venture has one operation and administration department, under which
there are departments of production, technology, sales, financial and
administration.
5.2 Joint Venture has one general manage, one vice manager. Board will hire or
fire the general and vice manager. General manager will be recommended by
Party B, vice manager will be recommended by Party A. Chairman of Board,
vice Chairman, and Board members could be general manager, vice manager or
hold in other higher administrative positions.
5.3 General and vice manger has the contract period of three years, and could
be renewed.
5.4 General manager will be responsible for the Board, with the help of vice
manager. When the absence of the general manager, vice manager will execute
the rights for the sake of the general manager.
5.5 General manager has the following rights:
a. Fulfill the decision from Board meetings.
b. Fulfill the annual production plan and investment plan
c. Lead the daily administrative and production activity
d. Draft the production plan, annual production report, financial report,
profit distribution plan and ask for the approval from Board.
e. Draft the internal control procedure
f. Draft the general administrative rules
g. Suggest the Board on hire or fire of the vice manager, person in
charge of financial status
h. Specify the rules for the company
i. Other duties delegated by Board
5.6 Joint Venture has one general engineer and one general accountant; both are
hired by Board, and under the lead of general manager.
5.7 General manager, vice manager are not allowed to be the general manger or
vice manger of other entities, nor are they allowed to join other entities
to compete with Joint Venture. The earnings from the above activity should
be compounded to Joint Venture.
5.8 If General manager, vice manager and other higher positioned employees
involved in fraud or gross negligence, they will be dismissed anytime upon
the approval from Board meeting.
No. 6 Profit distribution
6.1 Joint Venture will specify the net income after tax to be the reserved
capital, capital for development, incentive to employees or employee
benefit. The distribution rate will be determined by Board meetings.
6.2 Net income after the above distribution will be distributed to each Party
by the investment ratio.
6.3 Profit would be distributed once each year, prior year distribution plan
and the amount each Party is entitled to will be announced during the last
3 months of the current fiscal year.
6.4 Before the makeup of the loss from prior fiscal year, there should be no
distribution of the current profit. The cumulated undistributed profit
could be distributed current year.
No. 7 Financial Accounting
7.1 Financial Accounting of Joint Venture will follow the Regulations for Joint
Venture set up by Department of Finance of People Republic of China.
7.2 Joint Venture has the fiscal year same as calendar year, from 1/1 to 12/31.
7.3 All the supporting documents, book, financial statement should be in
Chinese.
7.4 RMB is the monetary unit in the book keeping, and the exchange rate to
other currencies is determined by the actual exchange rate announced by
China Bank on the exchange date. Other issues on foreign currencies will
follow the relating regulations on foreign currency of People Republic of
China and the Contract.
7.5 Joint venture will open bank account in the bank that has the power to deal
with foreign currency.
7.6 Joint Venture will use double entry book keeping.
7.7 The following should be recorded in the financial book:
a. All the cash received, cash disbursements
b. All the sales and purchases
c. Debt liability
d. Time, amount, increase or transfer of registered capital
7.8 Financial department should compile the prior year financial statement
including balance sheet and income statement within the first 3 months of
the following year, have it audited and signed by CPAs and turn in to Board
for approval.
7.9 Each Party in the Joint Venture has the rights to hire his own accountant
to check books.
7.10 The useful life of the fixed assets will be determined by Earned Income Tax
Law of the joint venture or foreign enterprises.
No. 8 Employees
8.1 The hire, fire, salary, benefit, insurance, protection, discipline of the
employees will be based on the Joint Venture Workforce Regulations of
People Republic of China.
8.2 Needed employees should be recommended by the Local Labor Department, or
approved by Local Labor Department, and publicly advertised, subject to
examine and hired by the merit system and sign the contract upon hiring.
8.3 Joint Venture has the rights to give warnings to those employees, who
violated the company regulations and disciplines, decrease their salaries,
or even fire them upon strong violations. The fired employees should be
reported to Local Labor Department
8.4 Salary is referred to relating Chinese regulations. According to the
specific situations of the Joint Venture, the Board will determine and
specify the salary in the labor contract. Joint Venture could give
employees salary increase with the development of the production, the
improvement of the work ability and technological level.
8.5 Benefit, bonus, labor protection and insurance will be covered in different
regulations, to assure the employee could work under normal situations.
No. 9 Union
9.1 Employees in Joint Venture have the rights to set up Union, to join Unions,
to participate the activity based on Union Law of People Republic of China.
9.2 Union in the Joint Venture is on behalf of the employees. Its duty is:
protect the employees rights and benefit based on the law; help the Joint
Venture to wisely arrange and use the benefit, incentive funds; organize
the employees to study the current political issue, technology, science and
professions; organize the art show and sports activity; educate employees
to comply with the discipline and do the best jobs in the work.
9.3 Union in the Joint Venture will sign the contract on behalf of employees
and supervise the contract fulfillment.
9.4 The person in charge of Union will be invited to attend the Board meeting
and speak out the opinion and reasonable request from employees.
9.5 Union will solve the dispute between Joint Venture and employees.
9.6 Each month Joint Venture will provide 2% of the total employees salary to
Union as the operation funds. Union will use the funds based on
Administrative Method of the Union Funds from General Union of People
Republic of China.
No. 10 Termination and liquidation
10.1 Joint venture has a life of 15 years, started from the approval of business
certificate.
10.2 If both Parties agree to prolong the life, Board meeting could make the
decision and turn in the written application to the original approval
authority within 6 months before the end. The written application must be
approved by the authority for the Joint Venture to prolong. The original
record keeping authority should be notified for the change.
10.3 If both Parties think it would be the best for the early termination, the
Joint Venture could be terminated earlier. Early termination should be the
decision unanimous made by the Board, and approved by the original approval
authority.
10.4 No matter normal or early termination, the Board should list the procedure
for liquidation and the rules and candidate for liquidation committee; form
the liquidation committee to liquidate the company assets.
10.5 The duty of the liquidation committee is to fully check the company assets,
liability and creditor rights, to compile the balance sheet and property
list, to set up the liquidation plan, to execute the plan after the
approval of Board.
10.6 During the liquidation, the committee is the party who answers for the
lawsuit or initiate the lawsuit.
10.7 Liquidation expenses and the compensation of the liquidation committee
should be paid off in the priority by the current assets.
10.8 After all the debts are paid off, the remaining assets will be distributed
by the investment ratio of Party A and B.
10.9 After the liquidation, Joint Venture should report to the original approval
authority, and cancel the registration from the original record keeping
authority, turn in the business certificate, notify the public.
10.10 After the liquidation, all the books should be kept by Party A.
No. 11 Regulations
11.1 The regulations set up by the Board for Joint Venture is as follows:
a. Operation and administration rules including all the working procedure
and the duty and rights for each department.
b. Employee code.
c. Salary system
d. Rule on the evaluation, promotion and bonus and punishment
e. Benefit
f. Financial system
g. Liquidation procedure
h. Other necessary procedure
No. 12 Supplementary
12.1 The modification of this article should be unanimous agreed by the Board,
and reported to the original approval authority.
12.2 This article is written in Chinese.
12.3 This Article should be approved by the Business Department of the People
Republic of Chinese or the designated department to be effective.
Modification has the same request.
12.4 The article is signed on 10/4/2003 at Shenzhen by the designated
representatives from two Parties.
Party A: Santai Science and Technology Industry, Ltd, representative: Xx Xxxxxxx
Party B: American Dairy Inc, representative: Xxx Xxxxxx
10/14/2003
