Contract
for the Joint Venture of
Xianyang Daming Electronics Co., Ltd.
May 8, 1996
Xianyang, Shaanxi, China
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Total Pages: 17
Contents
Chapter 1 General Provisions
Chapter 2 Parties to the Joint Venture
Chapter 3 Establishment of the Joint Venture Company
Chapter 4 Purpose, Scope and Scale of Production and Business
Chapter 5 Total Amount of Investment and
Registered Capital
Chapter 6 Responsibilities of Each Party to the Joint Venture
Chapter 7 Selling of Products
Chapter 8 The Board of Directors
Chapter 9 Business Management Office
Chapter 10 Equipment
Chapter 11 Labor management
Chapter 12 Taxes, Finance and Audit
Chapter 13 Duration of the Joint Venture
Chapter 14 The Disposal of Assets after Expiration of the
Duration
Chapter 15 Insurance
Chapter 16 The Amendment, Alteration and Discharge of the
Contract
Chapter 17 Liabilities for Breach of Contract
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Chapter 18 Force Majeure
Chapter 19 Applicable Law
Chapter 20 Settlement of Disputes
Chapter 21 Language
Chapter 22 Effectiveness of the Contract and Miscellany
2
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 Chinese laws and
regulations, Xianyang Pianzhuan Development Co., Ltd. and Asia Electronics
Holding Co., Ltd. adhering to the principle of equality and mutual benefit and
through friendly consultations, agree to jointly invest to set up a joint
venture enterprise in Xianyang City, Shaanxi Province, the People's Republic of
China. The contract is worked out thereunder.
Chapter 2 Parties to the Joint Venture
Article one
Parties of this Contract are as follows:
Xianyang Pianzhuan Development Co., Ltd. (herein after referred to as Party A)
registered with Xianyang in China and its legal address is at Xianyang City,
China.
Legal Representative: Name: Xx, Xxxx Xxxx
Position: Chairman & CEO
Nationality: P.R. China
Asia Electronics Holding Co., Ltd. (herein after referred to as Party B)
registered in British Virgin Island. Its legal address is at Xxx Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000, XXX.
Legal Representative: Name: To, Xxxxx Xxx
Position: President
Nationality: Hong Kong
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Chapter 3 Establishment of the Joint Venture Company
Article Two
In accordance with "the Law of the People's Republic of China on Joint Ventures
Using Chinese and Foreign Investment" and other relevant Chinese Laws and
regulations, both Parties to the joint venture agree to joint venture limit
liability company. (herein after referred to as the Joint Venture Company.)
Article Three
The name of the joint venture company is Xianyang Daming Electronics Co., Ltd.
The legal address of the joint venture company is Xx. 00 Xxxx Xxxxxxx Xxxx.,
Xxxxxxxx, Xxxxxxx, Xxxxx.
Article Four
All activities of the joint venture company shall be governed by the laws,
decrees and pertinent rules and regulations of the People's Republic of China.
Article Five
The organization of the joint venture company is a limited liability company.
Each party to the joint venture company is liable to the joint venture company
within the limit of the capital subscribed by it. The profits, risks and losses
of the joint venture company shall be shared by the parties in proportion to
their contribution to the registered capital.
Chapter 4 Purpose, Scope and Scale of Production and Business
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Article Six
The purpose of the parties to the joint venture is in conformity with wish of
enhancing the economic cooperation and technical exchange to improve the product
quality, develop new products and gain competitive position in the world market
in quality and price by adopting advanced and appropriate managing methods, and
ensure satisfactory economic benefits for each investor.
Article Seven
The productive and business scope of the joint venture company is to produce
deflection yoke products; provide maintenance service after the sales of the
products; and study and develop new electronic products.
Article Eight
The production scale of the joint venture company put into operation is one
million deflection yokes per year.
Chapter 5 Total Amount of Investment and Registered Capital
Article Nine
The total amount of investment of the joint venture company is US$2,560,000. The
contribution to the joint venture by the Parties is US$ 1,800,000, which will be
the registered capital of the joint venture company, of which each party shall
respectively contribute:
Party A: US$360,000,
accounting for twenty percent;
Party B: US$l,440,000,
accounting for eighty percent.
Article Ten
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Both Party A and Party B will contribute the following as their investment:
Party A: Ground and factory building.
Party B: Imported equipment and moulds.
Article Eleven
Party A and Party B will contribute their investment to the joint venture
company according to their share proportion.
Article Twelve
In case either Party to the joint venture intends to sell all or part of his
investment subscribed to a third party, consent shall be obtained from the other
party to the joint venture in advance, approval from the examination and
approval authority is required.
When one party to the joint venture assigns his investment, the other party has
preemptive right on it.
Chapter 6 Responsibilities of Each Party to the Joint Venture
Article Thirteen
Party A and Party B shall be respectively responsible for the following matters:
Responsibilities of Party A:
1. Handling of applications as per agreed by both Parties for approval,
registration, business license and other matters concerning the establishment of
the joint venture company from relevant departments in charge in China;
2. Providing cash, machinery and equipment and premises in accordance with the
stipulations in article 9, 10 and 11;
3. Assisting the joint-venture company in purchasing or leasing
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equipment, materials, raw materials, articles for office use, means of
transportation and communication facilities, etc.;
4. Assisting the joint venture company in technical and commercial discussion
for importing equipment by providing with necessary technical datas and
premises, and in settling the domestic transportation and custom formalities;
5. Marketing of the product of the joint venture company;
6. Assisting the joint venture company in contacting and settling the
fundamental facilities such as water, electricity, transportation, etc.;
7. Assisting the joint venture in recruiting Chinese management, personnel,
technical personnel, workers, and other personnel needed;
8. Assisting the company in obtaining the favourable policies.
9. Assisting the company for approval from the State to remit foreign exchanges
from China to abroad.
10. Handling other matters entrusted by the joint venture company.
Responsibilities of Party B:
1. Providing cash with the stipulations in article 9, 10 and 11;
2. Assisting the joint venture company in selecting and purchasing equipment,
parts, transportation means, office facilities and materials outside China;
3. Assisting in selling the deflection yoke products and other products of the
joint venture company to foreign market and providing with informations form
foreign market.
4. Handling other matters entrusted by the joint venture company.
Chapter 7 Selling of products
Article Fourteen
The product of the joint venture company will be sold both on domestic market
and overseas markets, the export part should account
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for 60% at least.
Article Fifteen
The price of the products to be sold is to be agreed by Party A and Party B,
which should accord with the market price. The joint venture has the right to
choose proper channels for selling at better prices, Party B has preemptive
right on agent the selling at the same price.
Article Sixteen
The quality of the exporting product should accord to the samples which are made
up to the standard and samples provided by Party B and approved by Party B to be
the standard sample.
Article Seventeen
In order to provide maintenance service to the products sold both in China or
abroad, the joint venture company may set up sales branches for maintenance
service both in China or abroad subject to the approval of relative Chinese
department.
Article Eighteen
The trade mark of the joint venture's products is decided by the board of
directors.
Chapter 8 The Board of Directors
Article Nineteen
The date of registration of the joint venture company shall be the date of the
establishment of the board of the joint venture company.
Article Twenty
The Board of Directors are composed of 5 directors, of which 1 shall be
appointed by Party A and 4 shall be appointed by Party B. The chairman of the
Board shall be appointed by Party B, and its vice-chairman by Party A. The term
of office for the directors, chairman and vice-chairman is 4 years. Their term
of office may be renewed if
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continuously appointed by the relevant Party. The Board of Directors should be
composed according to the contribution proportion subject to any change.
Article Twenty-one
The highest authority of the joint venture company shall be its board of
directors. It shall decide all major issues concerning the joint venture
company. Unanimous approval shall be required before any decisions are made
concerning major issues. As for other matters approval by majority or a simple
majority shall be required.
Article Twenty-two
The chairman of the board is the legal representative of the joint venture
company. Should the chairman be unable to exercise his responsibilities for some
reasons, he shall authorize the vice-chairman or any other director to represent
the joint venture company temporarily.
Article Twenty-three
The board of directors shall convene at least one meeting every year. The
meeting shall be called and presided over by the chairman of the board. The
chairman may convene an interim meeting based on a proposal made by more than
one-third of the total number of directors. Minutes of the meetings written in
Chinese shall be placed on file.
Chapter 9 Business Management Office
Article Twenty-four
The joint venture company shall establish a management office which shall be
responsible for its daily management. The management office shall have a general
manager, appointed by Party A ; The general manager, whose term of office is 4
years, shall be invited by the board of directors. The general accountant and
engineer will be invited by the general manager.
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Article Twenty-five
The responsibility of the general manager is to carry out the decisions of the
board meeting and to organize and conduct the daily management of the joint
venture company. The deputy general managers shall assist the general manager in
his work.. Several department managers may be appointed by the management
office, who shall be responsible for the works in various department
respectively, handle the matters handed over by the general manager, and shall
be responsible to them.
Article Twenty-six
In case of graft or serious dereliction of duty on the part of the general
manager and deputy general managers, the board of directors shall have the power
to dismiss them at any time.
Chapter 10 Purchasing of Equipment
Article Twenty-seven
In its purchase of required raw materials, fuel, parts, means of transportation
and articles for office use, etc., the joint venture company shall give first
priority to purchase in China if quality and price are suitable.
Article Twenty-eight
In case of the joint venture company entrusts Party B to purchase equipment in
overseas markets, the price should not exceed the market price, otherwise the
Chairman of the Board has the right to choose other purchasing channels.
Chapter 11 Labor Management
Article Twenty-nine
Labor contract covering the recruitment, employment, dismissal and
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resignation, wages, labor insurance, welfare, rewards of the joint venture
company shall be drawn up between the joint venture company as a whole or
individual employees accordance with the "Regulations of the People's Republic
of China on Labor Management in Joint Ventures Using Chinese and Foreign
Investment" and its implementation rules.
The labor contracts shall, after being signed, be filed with the local labor
management department.
Article Thirty
The appointment of high ranking administrative personnel recommended by all
parties, their salaries, social insurance, welfare and the standard of traveling
expenses, etc. shall be decided by the meeting of the board of directors.
Article Thirty-one
The salaries, social insurance, welfare standard shall be decided by the Board
of Directors according to the relative laws of the People's Republic of China
and subject to the economic situation of the joint venture company.
Chapter 12 Taxes, Finance and Audit
Article Thirty-two
The joint venture company shall pay taxes in accordance with the stipulations of
Chinese laws and other relative regulations.
Article Thirty-three
Staff members and workers of the joint venture company shall pay individual
income tax according to the "Individual Income Tax Law of the People's Republic
of China"
Article Thirty-four
Allocations for reserve funds, expansion funds of the joint venture
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company and welfare funds and bonuses for staff and workers shall be set aside
in accordance with the stipulations in "The Law of People's Republic of China on
Joint Ventures Using Chinese and Foreign Investment". The annual proportion of
allocations shall be decided by the board of directors according to the business
situations of the joint venture company.
Article Thirty-five
The fiscal year of the joint venture company shall be from January 1 to December
31. All vouchers, receipts, statistic statements and reports, account books
shall be written in Chinese.
(English language will be used concurrently for main documents.)
Article Thirty-six
Financial checking and examination of the joint venture company shall be
conducted by an auditor registered in China and reports shall be submitted to
the board of directors and the general manager.
In case Party B considers it necessary to employ a foreign auditor registered in
another country to undertake annual financial checking and examination, Party A
shall give his consent. All the expenses thereof shall be borne by Party B.
Article Thirty-seven
In the first three months of each fiscal year, the manager shall prepare
previous year's balance sheet, profit and loss statement and proposal regarding
the proposal of profits, and submit them to the board of directors for
examination and approval.
Chapter 13 Duration of the Joint Venture
Article Thirty-eight
The duration of the joint venture company is 50 years. The establishment of the
joint venture company shall start from the date on which the business license of
the joint venture company is issued.
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An application for the extension of the duration, proposed by one party and
unanimously approved by the board of directors, shall be submitted to the
Ministry of Foreign trade and Economic Cooperation of the People's Republic of
China ( or the examination and approval authority entrusted by it) six months
prior to the expiry date of the joint venture.
Chapter 14 The Disposal of Assets After Expiration of the Duration
Article Thirty-nine
Upon the expiration of the duration termination before the date of expiration of
the joint venture, liquidation shall be carried out in accordance with the
proportion of investment contributed by Party A and Party B.
Chapter 15 Insurance
Article Forty
Insurance policies of the joint venture company on various kinds of risks shall
be under written with the insurance company of China. Types, value and duration
of insurance shall be decided by the board of directors in accordance with the
stipulations of the People's Republic of China.
Chapter 16 The Amendment, Alteration and Discharge of the Contract
Article Forty-one
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The amendment of the contract or other appendixes shall come into force only
after the written agreement is signed by Party A and Party B and approved by the
original examination and approval authority.
Article Forty-two
In case of inability to fulfill contract or to continue operation due to heavy
losses in successive years as a result of force majeure, the duration of the
joint venture company and the contract shall be terminated before the time of
expiration after being unanimously agreed upon by the board of directors and
approved by the original examination and approval authority.
Article Forty-three
Should the joint venture company be unable to continue its operations or achieve
the business purpose stipulated in the contract due to the fact that one of the
contracting parties fails to fulfill the obligations prescribed by the contract
and articles of association, that party shall be deemed as unilaterally
terminating the contract. The other party shall have the right to terminate the
contract in accordance with the provisions of the contract after being approved
by the original examination and approval authority as well as to claim damages.
In case Party A and Party B agree to continue the operation, the party who fails
to fulfill the obligations shall cover the losses thus caused to the joint
venture company.
Chapter 17 Liabilities for Breach of Contract
Article Forty-four
Should either Party A or Party B fail to pay on schedule the contributions in
accordance with the provisions defined in Chapter 5 of this contract, the
breaching party shall pay to the other party 0.5% of the contribution starting
from the first month after exceeding the time limit. Should the breaching party
fail to pay after 3 months, 0.5% of the contribution shall be paid to the other
party, who shall have the
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right to terminate the contract and to claim damages
to the breaching party in accordance with the stipulations in Article Forty-one
of the contract.
Article Forty-two
Should all or part of the contract and its appendixes be unable to be fulfilled
owing to the fault of one party, the breaching party shall bear the
responsibilities thus caused. Should it be the fault of both parties, they shall
bear their respective responsibilities according to actual situations.
Article Forty-three
In order to guarantee the performance of the contract and its appendixes, both
Party A and Party B shall provide each other the bank guarantees for the
performance of the contract.
Chapter 18 Force Majeure
Article Forty-four
Should either of the parties to the contract be prevented from executing the
contract by force majeure, such as earthquake, typhoon, flood, fire and war and
other unforeseen events, and their happening and consequences are unpreventable
and unavoidable, the prevented party shall notify the other party by cable
without any delay, and within 15 days thereafter provide the detailed
information of the events and a valid document for evidence issued by the
relevant public notary organization for explaining the reason of its inability
to execute or delay the execution of all or part of the contract. Both parties
shall, through consultations, decide whether to terminate the contract or
whether to delay the execution of the contract according to the effects of the
events on the performance of the contract.
Chapter 19 Applicable Law
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Article Forty-five
The formation of this contract, its validity, interpretation, execution and
settlement of the disputes shall be governed by the related laws of the People's
Republic of China.
Chapter 20 Settlement of Disputes
Article Forty-six
Any disputes arising from the execution of, or in connection with the contract
shall be settled amicably through negotiation. In case no settlement can be
reached through negotiation, the case shall be submitted to the China
International Economic and Trade Arbitration Commission, Beijing, China, for
arbitration in accordance with its rules of procedure. The arbitral award is
final and binding on both parties.
Article Forty-seven
During the arbitration, the contract shall be executed continuously by both
parties except for matters in dispute.
Chapter 21 Language
Article Forty-eight
The contract shall be written in Chinese version and in English version. Both
languages are equally authentic. In the event of any discrepancy between the two
afore-mentioned versions, the Chinese version shall prevail.
Chapter 22 Effectiveness of the Contract and Miscellany
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Article Forty-nine
The appendixes drawn up in accordance with the principles of the contract are
integral part of this contract, including the Articles of Association.
Article Fifty
The contract and its appendixes shall be approved by the legal person
representative of both parties and come into force beginning from the date of
approval by the Ministry of Foreign Trade and Economic Cooperation of the
People's Republic of China (or its entrusted examination and examination and
approval authority.)
Article Fifty-one
Should notices in connection with any party's rights and obligations be sent by
either Party A or Party B by telegram or telex, etc., the written letter notices
shall be also required afterwards. The legal addresses of Party A and Party B
listed in this contract shall be the posting addresses.
Article Fifty-two
The contract is signed in Xianyang, Shaanxi, China by the authorized
representatives of the two parties on May 8, 1996.
Party A: Xianyang Pianzhuan Development Co., Ltd.
(Signature) /s/
Party B: Asia Electronics Holding Co. Inc.
(Signature) /s/
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