JOINT VENTURE CONTRACT
Chapter 1. General Provisions
In accordance with the "Law of the People's Republic of China on
Chinese-Foreign Equity Joint Ventures" and relevant Chinese laws and
regulations, LIUZHOU OVM JOINT STOCK CO., LTD. (formerly Liuzhou Construction
Machinery General Factory) and KOLCARI INVESTMENTS LIMITED (a British Virgin
Islands company), 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 Liuzhou, Guangxi Zhuang Autonomous Region, the People's
Republic of China ("PRC" or "China"), and hereby enter into this Joint Venture
contract (the "Contract").
Chapter 2. Parties to the Joint Venture
Article 1.
Parties to this Contract are as follows:
LIUZHOU OVM JOINT STOCK CO., LTD (hereinafter referred to as Party A),
registered in Guangxi Zhuang Autonomous Region, China, and having its legal
address at 0 Xxxxxxxx Xxxx, Xxxxxxx xxxx, xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxx, XXX.
Name of legal representative: Xx Xxx Xxx
Position: Director
Nationality: Chinese
KOLCARI INVESTMENTS LIMITED (hereinafter referred to as Party
B) incorporated in the British virgin Islands and having its legal
address at P.O. Box 71, Criagmuir Xxxxxxxx, Road Tortola, British
Virgin Islands.
Name of legal representative: Xxxxx Xxxx Xx
Position: Managing Director
Nationality: Chinese
Chapter 3. Establishment of the Joint Venture Company
Article 2.
In accordance with the "Law of the People's Republic of China on
Sino-Foreign Equity Joint Ventures" and other relevant laws and regulations,
both parties to the Joint Venture agree to set up LIUZHOU OVM CONSTRUCTION
MACHINERY CO., LTD. a joint venture limited liability company (hereinafter
referred to as the "Joint Venture Company").
Article 3.
The name of the Joint Venture is LIUZHOU OVM CONSTRUCTION MACHINERY CO.,
LTD.
The Chinese language is ______________________________.
The Legal address of the Joint Venture company is at 0 Xxxxxxxx Xxxx,
Xxxxxxx Xxxx, Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxx, XXX.
Article 4.
All activities of the Joint Venture company shall be governed by the laws
and pertinent rules and regulations of the People's Republic of China.
Article 5.
The Joint Venture Company shall be 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
contributions of the registered capital.
Chapter 4. The Purpose, Scope and Scale of Production and Business
Article 6.
The purpose of the Joint Venture Company is to enhance the economic
cooperation and technical exchange between the parties, to improve products
quality, develop new products, and to gain competitive position in the world
market by adopting advanced and appropriate technology and scientific management
method, so as to raise economic efficiency and ensure satisfactory economic
benefits for both parties.
Article 7.
The business scope of the Joint Venture Company is to produce and market
all kinds of construction machinery, bridge anchorages, stay cable and stressing
jacks and installation and construction of steel-structured bridge, etc.
Article 8.
The production scale of the Joint Venture Company is to realize an annual
sales of around RMB 1-2 billion from the sale of all kinds of construction
machinery, bridge anchorages, stay cable and stressing jacks.
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Chapter 5. Total Amount of Investment and the Registered Capital
Article 9.
The total amount of investment of the Joint Venture Company is US
$6,000,000.
Article 10.
Investment contributed by the parties shall be US $4,000,000 which shall
be the registered capital of the Joint Venture Company.
Of which: Party A shall contribute Rmb 10,200,000 or US $1,200,000 which
shall account for 30% of the registered capital; Party B shall contribute US
$2,800,000, which shall account for 70% of the registered capital.
Article 11.
Both Party A and Party B shall contribute the following as their
investment:
Party A: par to fits existing assets (premises, plan and equipment) valued
at Rmb 10,200,000 or US $1,200,000 in accordance with the method and procedure
adopted by the government (see Appendix).
Party B: cash of US $2,800,000.
Article 12.
The registered capital of the Joint Venture company shall be paid in three
installments by Party A and Party B according to their respective share of the
investment.
The three installment shall be paid as follows:
First installment: Each party should pay 15% of its capital subscribed
within 60 days after the date of registration of the Joint Venture company.
Second installment: Each party should pay 55% of its capital subscribed
within 180 days after the date of registration of the Joint Venture company.
Third installment: Each party should pay the remaining 30% of its capital
subscribed within 360 days after the date of registration of the Joint Venture
Company.
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Article 13.
In case any party to the Joint Venture intends to assign all or part of
its capital subscribed to a third party, prior written consent shall be obtained
from the other party to the Joint Venture and approval from the original
examination and approval authority is required.
When one party to the Joint Venture intends to assign all or part of its
subscribed capital, the other party has preemptive right.
Chapter 6. Compensation for Use of Intangible Assets, Equipment and Plants
Article 14.
The intangible assets (including Party A's registered trademark, goodwill,
patents and the existing unique production technique and technology etc.) owned
by Party A shall be put in use and properly compensated by the Joint Venture
Company. Both parties to the Joint Venture shall negotiate and conclude an
agreement concerning the amount of compensation to Party A in relation to the
use of the intangible assets by the Joint Venture Company.
Article 15.
For those intangible assets such as jointly developed new products,
registered patent technology and trademark that are developed by the Joint
Venture Company after the establishment of the Joint Venture shall belong to the
Joint Venture Company. Neither party is allowed to transfer the foregoing
intangible assets to any third party without the mutual consent of both parties
to the Joint Venture.
Article 16.
For those fixed assets that are owned by Party A and have not yet been
injected into the Joint Venture Company may be used by the Joint Venture Company
for production purpose by entering into a lease with Party A. The rental rates
shall be determined through negotiation between both parties to the Joint
Venture and should be governed by a separate agreement.
Article 17.
Land Use Fee: As Party A owns the land use right in which the Joint
Venture operations are located, the Joint Venture Company shall lease the right
to use the land from Party A by paving an annual rental of RMB 1.5/sq.m. The
area of land use right under the lease is estimated to be approximately 40,000
sq.m.
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Chapter 7. Profit Distribution and Loss Assumption
Article 18.
The parties to the Joint Venture shall contribute capital in proportion to
their respective share of total registered capital and shall accordingly share
the profit and losses of the Joint Venture in proportion to their respective
share of the total registered capital. In principle, the parties to the Joint
Venture shall share profits and losses for every fiscal year in proportion to
their respective share of the total registered capital until the termination or
expiration of the Joint Venture Company.
Chapter 8. Responsibilities of Each Party to the Joint Venture
Article 19.
The parties to the Joint Venture shall assume the following
responsibilities:
Party A:
(1) To apply for and secure approval, registration, business license and
other government authorizations concerning the establishment of the Joint
Venture Company;
(2) to provide part of the assets (including the liabilities) in
accordance with the provisions in Article 11 and Article 12 of this Contract and
submit to the relevant authorities for examination and approval;
(3) To warrant that the financial statements of Party A have fully
disclosed all assets and liabilities of Party A prior to the establishment of
the Joint Venture Company and the financial statements should be audited by an
overseas auditors engaged by Party B. Any liabilities that are not reflected in
the financial statements of Party A prior to the establishment of the Joint
Venture shall be borne by Party A:
(4) To warrant that the property rights for all assets injected into the
Joint Venture are complete, no third party is entitled to any property right
therein or claims any property rights;
(5) To appoint the Joint Venture Company to undertake the manufacture and
marketing businesses originally undertaken by Party A. After its establishment
the Joint Venture Company shall enter into a separate agreement with the parties
concerned to govern this arrangement;
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(6) To warrant the recoverability of all the accounts receivables and
other receivables that were injected into the Joint Venture Company by Party A
and which arose before the formal registration and establishment of the Joint
Venture Company Any bad debts arising therefrom shall be borne by Party A. Party
A agrees, after the formal registration and establishment of the Joint Venture,
to conclude a relevant agreement with the Joint Venture or, to enter into an
arrangement upon the mutual consent of both parties to the Joint Venture, to
warrant that any accounts receivable and other receivables of Party A, which
arose prior to the formal registration and establishment of the Joint Venture,
shall be recovered within 12 months following the formal establishment of the
Joint Venture Company; any amounts which cannot be recovered within the
designated 12-month period shall be charged against the accounts payable to
Party A by the Joint Venture Company.
(7) To recommend to or to assist the Joint Venture Company to recruit
local Chinese managerial personnel, technical personnel, workers and other
personnel as needed;
(8) To assist Party B's expatriate staff in handling matters like
obtaining provisional residence cards, work permits and other traveling matters;
(9) To handle other matters entrusted to it by the Joint Venture Company.
(10) To provide cash contribution in accordance with the provisions in
Article 11 and Article 12 of this Contract;
(11) To assist the Joint Venture Company to purchase the machinery,
equipment and materials outside China as authorized by the Joint Venture;
(12) to promote and market products and to procure engineering contracts
outside China on behalf of the Joint Venture Company;
(13) To provide needed technical personnel, as determined by the Joint
Venture Company, for installing, testing and trial production of the machinery
and equipment;
(14) To assist in training senior managerial personnel, marketing
personnel and financial accounting personnel of the Joint Venture Company and
also to train technical personnel and workers for the Joint Venture Company;
(15) To organize the procurement of raw materials outside China; and
(16) To handle other matters entrusted to it by the Joint Venture Company.
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Chapter 9. The Board of Directors
Article 20.
The Joint Venture Company shall establish a Board of Directors. The date
of registration of the Joint Venture Company shall be the date of the
establishment of the Board of Directors of the Joint Venture Company.
Article 21.
The Board of Directors shall consist of 7 Directors, of which 3 shall be
appointed by Party A and 4 by Party B. The Chairman of the Board shall he
appointed by Party B and the Vice-Chairman by Party A. The term of office for
the Directors, Chairman and Vice-- Chairman shall be three years, their term of
office may be renewed upon re-appointment by the original appointing party.
Article 22.
The highest authority of the Joint Venture Company shall he the Board of
Directors. It shall have the power to decide all major issues concerning the
Joint Venture Company. Resolution on the following matters shall require
unanimous agreement among Directors present at the Board meeting:
(1) formulating or amending the Articles of Association for the Joint
Venture Company;
(2) terminating and dissolution of the Joint Venture Company;
(3) increase or assignment of the registered capital of the Joint Venture
Company; and
(4) merger of the Joint Venture Company with other economic organization.
Resolution on all other matters shall require the approval by a simple
majority of the Board of Directors.
Article 23.
The Chairman of the Board is the legal representative of the Joint Venture
Company. Should the Chairman be unable to exercise his duties for any reason,
the Chairman shall authorize the Vice-Chairman or any other Directors to
represent the Joint Venture Company temporarily.
Article 24.
The Board of Directors shall convene at least one meeting ever year. The
meeting shall he called and presided over by the Chairman of the Board. The
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Chairman xxx xxxxxxx an interim meeting if an interim meeting is proposed by at
least one-third of the Directors. Minutes of the meetings shall be properly kept
in the Joint Venture Company's file.
The Board meeting will principally he held at the location of the Joint
Venture.
Chapter 10. Supervisory Board
Article 25.
The Joint Venture Company shall establish a supervisory board which shall
consist of 3 persons, one appointed by each party to the Joint Venture and one
from the staff and workers of the Joint Venture Company. The first Chairman of
the supervisory hoard will he recommended by Party A.
Article 26.
The term of office for the supervisory board shall be three years, which
may be renewed re-appointment by the original appointing part.
Chapter 11. Business Management Office
Article 27.
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 and several Deputy General Managers. The first General Manager
shall he nominated by Party A and appointed by the Board with a term of office
of three years, and the Deputy General Managers shall he nominated by the
General Manger and appointed by the Board.
Article 28.
The responsibility of the General Manager is to carry out the decisions of
the Board meeting and to manage the daily operation of the Joint Venture
Company. The Deputy General Managers shall assist the General Manager in his
work.
The Management office may set up various departments and appoint
Departmental Managers, who shall be responsible for managing matters within the
respective department and matters handed over by the General Manager. Department
Managers shall be responsible to the General Manager.
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.
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Chapter 12. Purchase of Equipment
Article 29.
In the purchase of required raw materials, fuel, parts means of
transportation and articles for office use, the Joint Venture Company shall give
first priority to purchase in China where the conditions concerning such
purchase are the same.
Article 30.
In case the Joint Venture Company entrusts Party B to purchase equipment
from overseas suppliers, the Joint Venture Company shall invite Party A to
participate in the purchase.
Article 31.
The equipment means of transportation, raw materials, parts and articles
for office use purchased from overseas suppliers by the Joint Venture Company
shall be inspected by the Commodity Inspection Department of China in accordance
with the Regulation of the Commodity Inspection of PRC.
Chapter 13. Preparation and Construction
Article 32.
During the period of preparation and incorporation of the Joint Venture
Company, a provisional office shall be established under the Board of Directors.
The provisional office shall consist of three persons. Out of which two will be
appointed by Party A and one from Party B. The provisional office shall have one
Manager nominated by Party A and one Deputy Manager nominated by Party B. The
Manager and Deputy Manager shall be appointed by the Board of Directors.
Article 33.
The provisional office shall be responsible for the establishment of the
Joint Venture Company, such as submitting an application to the relevant
authorities for approval and procurement the business license from the relevant
Chinese authorities.
Chapter 14. Labor Management
Article 34.
Labor contract concerning employment, dismissal and resignation, wages,
labor insurance, welfare, rewards, penalty and other matters of the staff and
workers of the Joint Venture Company shall be drawn up between the Joint Venture
Company and the Trade
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Venture Company shall he drawn up between the Joint Venture Company between the
Joint Venture company and the Trade Union of the Joint Venture company as a
whole, or individual employees in accordance with the "Regulations of the
People's Republic of China on Labor Management in Sino-Foreign Equity Joint
Ventures and its Implementation Rules."
The labor contracts shall, after being signed, be filed with the Liuzhou
Labor Management Department.
Articles 35.
The appointment of senior administrative personnel nominated by both
parties to the Joint Venture Company, their salaries, social insurance, welfare,
benefits and the traveling expenses shall he decided by the Board of Directors.
Chapter 15. Taxes, Finance and Audit
Article 36.
The Joint Venture Company shall pay taxes in accordance with the
provisions of Chinese laws and other relevant regulations.
Article 37.
Staff members and workers of the Joint Venture Company shall pay
individual income tax in accordance with the "Individual Income Tax Law of the
People's Republic of China".
Article 38.
The reserve fund, the welfare and bonus fund for staff and workers, and
the development fund of the Joint Venture Company shall be appropriated by the
Joint Venture Company in accordance with the provisions of the "Law of the
People's Republic of China on Sino-Foreign Equity Joint Venture" and relevant
regulations. The amount of such appropriations shall be decided by the Board of
Directors according to the business financial conditions of the Joint Venture
Company.
After taxes are paid and the various funds are appropriated, the remaining
profits may be distributed between the parties according to the proportion of
each party's share in the registered capital.
Article 39.
The finance and accounting system and the organization of the finance and
accounting department of the Joint Venture Company shall be formulated in
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accordance with the "Stipulations of the Finance and Accounting System of the
Sino-Foreign Equity Joint Venture" and relevant regulations.
The finance and accounting system shall be filed to the Liuzhou Finance
and Taxes Bureau for record.
Chapter 16. Duration of the Joint Venture
Article 40.
The duration of the Joint Venture Company is 30 years. The establishment
of the Joint Venture Company shall continence from the date on which the
business license of the Joint Venture Company is issued.
An application for the extension of the duration, proposed by one party
and unanimously approved by the Board of Directors, shall be submitted to the
original examination and approval authority six months prior to the expiry date
the Joint Venture Company.
Chapter 17. The Disposal of Assets After the Expiration of the Duration
Article 41.
Upon the expiration of the duration or termination before the date of
expiration of the Joint Venture Company, liquidation shall be carried out
according to the relevant Chinese law. The liquidated assets shall be
distributed in accordance with the proportion of the respective share of the
total registered capital by each party.
Chapter 18. Insurance
Article 42.
Insurance policies of the Joint Venture Company, on various kinds of risks
shall be underwritten by the People's Insurance Company of China. Types, value
and duration of the insurance shall be decided bs the Board of Directors in
accordance with the provisions of the People's Insurance Company of China.
Chapter 19. The Amendment, Alteration and Discharge of the Contract
Article 43.
Any amendment of the Contract or other appendices shall come into force
only after a written agreement is signed by both Party A and Party B and
approved by the original examination and approval authority.
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Article 44.
In case of inability to implement the Contract or continue the operations
of the Joint Venture Company due to heavy losses or force majeure, the duration
of the Joint Venture Company and the Contract shall be terminated before the
time of expiration after such termination is unanimous agreed upon by the Board
of Directors and approved by the original examination and approval authority.
Article 45.
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 fulfil the obligations prescribed by the
Contract and the Articles of Association, or seriously violate the Stipulations
of the Contract and Articles of Association, the defaulting party shall be
deemed as unilaterally terminates the contract. The other party shall have the
right to terminate the contract in accordance with the provisions of the
Contract after such termination is approved by the original examination and
approval authority and shall also have the right to claim damages against the
defaulting party. In case Party A and Party B of the Joint Venture company agree
to continue the operation, the defaulting party shall be liable to the economic
losses incurred by the Joint Venture Company as a result of such default.
Chapter 20. Liabilities for Breach of Contract
Article 46.
Should any Party fails to pay the contributions in accordance with the
provisions defined in Chapter 5 of this Contract, the defaulting party shall pay
to the other party a compensation equal to 2% of its prescribed contributions
commencing from the first month after the designated period of contribution.
Should the defaulting party fail to pay 6 months after the designated period of
contribution, an amount equal to 12% of its prescribed contribution shall be
payable by the defaulting party to the other party, who shall also have the
right to terminate the contract and to claim damages from the defaulting party
in accordance with the stipulations in Article 46 of the Contract.
Article 47.
If all or part of the Contract and its appendices be unable to be
fulfilled owing to the fault of one party. The defaulting party shall bear the
responsibilities thus caused. Should it be the fault of both parties, they shall
bear their respective responsibilities according to actual circumstances.
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Chapter 21. Force Majeure
Article 48.
Should either party to the Contract he prevented from performing the
Contract by force majeure, such as earth-quake, typhoon, flood, fire, war and
other unforeseen events and their occurrence and consequences are unpreventable
and unavoidable, the party affected by such event shall notify the other party
by telex without any delay and within 15 days, the party affected by such event
should provide the detailed information of the events and a valid evidencing
document issued by the relevant public notary organization to explain the reason
of its inability to perform or delay the performance of part of the Contract.
Both parties shall through consultations, decide whether or not to terminate the
Contract or to exempt all or part of their respective obligations under the
Contract or whether to delay the performance of the Contract.
Chapter 22. Applicable Law
Article 49.
The formulation of this Contract, its validity, interpretation, execution
and settlement of the disputes shall be governed by the relevant laws of the
People's Republic of China.
Chapter 23. Settlement of Disputes
Article 50.
Any disputes arising from the performance of, or in connection with the
Contract shall be settled through friends consultations between both parties.
Failing which, the disputes shall be submitted to the Foreign Economic and Trade
Arbitration Commission of the China Council for the Promotion of International
Trade in accordance with its rules and procedures. The arbitral award is final
and binding upon both parties. The fee for arbitration shall be paid by the
party against whom the decision is rendered.
Article 51.
During the arbitration, the Contract shall continue to be performed by
both parties except for matters in disputes.
Chapter 24. Effectiveness of the Contract and Miscellaneous
Article 52.
The appendices drawn up in accordance with the principles of this Contract
are integral part of this Contract, including the Articles of Association.
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Article 53.
The Contract and its appendices shall come into force beginning from the
date of registration and approval by the examination and approval authority of
Liuzhou government.
Article 54.
The Contract is signed in Liuzhou City, Guangxi Zhuang Autonomous Region,
China.
Article 55.
The Contract is signed in Liuzhou City, Guangxi Zhuang Autonomous Region,
China by the authorized representatives of both parties on April 18, 1995.
Party A: Party B:
LIUZHOU OVM JOINT STOCK KOLCARI INVESTMENTS LIMITED
CO., LTD.
By:_______________________ By:__________________________
Xx Xxx Sen Xxxxx Lung Po
Dated: April 18, 1995
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Articles of Association for Sino-Foreign
Equity Joint Venture
Chapter 1. General Provisions
Article 1.
In accordance with the "Law of the People's Republic of China on
Sino-Foreign Equity Joint Ventures", the Joint Venture Contract signed on April
18, 1995, by LIUZHOU OVM JOINT STOCK CO., LTD. (hereinafter referred to as Party
A) and KOLCARI INVESTMENTS LIMITED, a British Virgin Islands Company
(hereinafter referred to as Party B) and the articles of association for the
Sino-Foreign Joint Venture (hereinafter referred to as the Joint Venture) hereby
is formulated.
Article 2.
The name of the Joint Venture shall be LIUZHOU OVM CONSTRUCTION MACHINERY
CO. LTD.
Its name in Chinese language is ___________ (OVM) ___________
The legal address of the Joint Venture is at 0 Xxxxxxxx Xxxx, Xxxxxxx
Xxxx, Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxx, P.R.C.
Article 3.
The names and legal address of the parties to the Joint Venture are as
follows:
Party A:
Name: LIUZHOU OVM JOINT STOCK CO., LTD.
Legal address: 0 Xxxxxxxx Xxxx, Xxxxxxx Xxxx,
Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, XXX
Name of legal
representative: Xx Xxx Xxx
Position: Director
Nationality: Chinese
Party B:
Name: KOLCARI INVESTMENTS LIMITED
Legal address: P.O. Box 71, Craigmuir Xxxxxxxx,
Road Town,
Tortola, British Virgin Islands
Name of legal
representative: Xxxxx Xxxx Xx
Position: Director and General Manager
Nationality: Chinese
Article 4.
The Joint Venture is a limited liability company.
Article 5.
The Joint Venture has the status of a legal person and is subject to the
jurisdiction and protection of Chinese law concerned. All its activities shall
be governed by Chinese laws, other pertinent rules and regulations.
Chapter 2. Purpose and Scope of Business
Article 6.
The purpose of the Joint Venture is to improve the product quality,
develop new products, and gain competitive position in the world market in
quality and price by adopting advanced and appropriate technology and scientific
management methods, so as to raise economic results and ensure satisfactory
economic benefits for each investor.
Article 7.
The business scope the Joint Venture is to manufacture and market all
kinds of construction machinery, bridge anchorage, stay cable, bridge stressing
jacks and installation and construction of steel-structure bridges, etc.
Article 8.
The production scale of the Joint Venture is to achieve an annual sales of
around 1-2 billion RMB Yuan from the sale of all kinds of construction
machinery, bridge anchorage, stay cable and stressing jacks.
Chapter 3. The Total Amount of Investment and the Registered Capital
Article 9.
The total amount of investment of the Joint Venture is USD 6,000,000. Its
registered capital is USD 4,000,000.
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Article 10.
The capital contributed by each part is as follows:
Party A shall contribute RMB 10,200,000 Yuan or USD 1,200,000, which shall
account for 30% of the registered capital.
Party B shall contribute USD 2,800,000, which shall account for 70% of the
registered capital.
Article 11.
Both parties shall contribute the capital respectively subscribed in
accordance with the provision of the Joint Venture Contract.
Article 12.
After the capital is paid by the parties to the Joint Venture, a Chinese
registered accountant engaged by the Joint Venture shall verify such paid-in
capital and provide a certificate of verification. According to this
certificate, the Joint Venture shall then issue an investment certificate which
includes the following items: name of the Joint Venture; date of the
establishment of the Joint Venture; names of the parties and the capital
contributed; date of the contribution of the capital, and the date of the
issuance of the investment certificate.
Article 13.
During the term of the Joint Venture, the Joint Venture shall not reduce
its registered capital.
Article 14.
Any increase of the registered capital of the Joint Venture Company shall
be approved by both parties to the Joint Venture and submitted to the original
examination and approval authority for approval.
Article 15.
Should one party assign all or part of its capital subscribed, consent
shall be obtained from the other party of the Joint Venture. When one party
intends to assign its subscribed capital, the other party has preemptive right.
Article 16.
Any increase, assignment of the registered capital of the Joint Venture
shall be approved by the Board of Directors and submitted to the original
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examination find approval authority for approval. The registration procedures
for changes shall be dealt with at the original registration and administration
office.
Chapter 4. The Board of Directors
Article 17.
The Joint Venture shall establish a Board of Directors which is the
highest authority of the Joint Venture.
Article 18.
The Board of Directors shall decide all major issues concerning the Joint
Venture. Its functions and powers are as follows:
(1) deciding and approving the important reports submitted by the general
manager (for instance: production plan, annual business report, funds, supply,
sales, etc.);
(2) approving annual financial reports budget of receipts and expenditures
distribution plan of annual profits;
(3) adopting major rules and regulations of the Joint Venture;
(4) signing labor contracts;
(5) deciding to set up branches;
(6) mending the articles of association of the Joint Venture;
(7) discussing and deciding the termination of production termination of
the Joint Venture or merging of the Joint Venture with another economic
organization;
(8) deciding the engagement of high-rank officials such as the general
manager' the deputy general manager, chief engineer, treasurer;
(9) handling the liquidation matters upon the expiration or termination of
the Joint Venture; and
(10) other major issues which shall be decided by the Board of Directors.
Article 19.
The Board of Directors shall consist of 7 Directors, of which 3 shall be
appointed by Party A and 4 by Party B. The term of office for the Directors is
three years and may be renewed.
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Article 20.
Chairman of the Board shall be appointed by Party B and Vice- Chairman of
the Board by Party A.
Article 21.
Any of the Directors may be removed bs its appointing party and replaced
at any time provided that the Board of Directors shall be notified of such
removal and replacement.
Article 22.
The Board of Directors shall convene at least one meeting every year. An
interim meeting of the Board of Directors may be held based on a proposal made
by more than one third of the total number of directors.
Article 23.
The Board meeting will in principally be held at the location of the Joint
Venture.
Article 24.
The Board meeting shall be called and presided by the Chairman. Should the
Chairman be absent, the Vice-Chairman shall call and preside the Board meeting.
Article 25.
The Chairman shall give each Director a written notice 30 class before the
date of the Board meeting. The notice shall contain the agenda, time and place
of the meeting.
Article 26.
Should any director be unable to attend the Board meeting, he may present
a proxy in written form to the Board. In case the director fails to attend or
appoint a proxy, he will be regarded as abstention.
Article 27.
The Board meeting requires a quorum of over two thirds of the total number
of Directors. If the quorum is less than two thirds, the decisions adopted by
the Board at such meeting shall be invalid.
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Article 28.
Detailed written records shall be made for each Board meeting and signed
by all the Directors attended in person or by proxy. The record shall be made in
Chinese and be kept in the Joint Venture's files by the person specially
assigned by the Board and must not be altered or destroyed by anyone during the
term of the Joint Venture.
Article 29.
The following matters shall be unanimously agreed upon and decided by the
Board of Directors attending the Board meeting:
(1) The formulation and amendment of the Articles of association of the
Joint Venture;
(2) The termination and dissolution of the Joint Venture:
(3) Any increase or assignment of the registered capital of the Joint
Venture.
(4) The merger of the Joint Venture with other economic organization.
Article 30.
The other matters except those mentioned in Article 29 shall be passed by
over of the Board members.
Chapter 5. Supervisory Board
Article 31.
A supervisory board shall be established in the Joint Venture. The
supervisory board shall consist of three persons, of which one will be nominated
by each Joint Venture partner and the remaining one from the staff and workers
of the Joint Venture.
Article 32.
The supervisory board has the following rights:
(1) to examine the financial affairs of the Joint Venture:
(2) to supervise the act of the Directors and managers in carrying out the
business operations of the Joint Venture so that their acts will not contravene
any laws, regulations, and the Joint Venture's Articles of Association;
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(3) to demand the rectification of the acts of the directors or the
managers if their act is detrimental to the benefit of the company;
(4) to propose to convene a provisional special meeting of the Directors:
(5) to perform other duties as provided by the Articles of Association of
the Joint Venture.
The supervisors are entitled to attend the Directors' meetings as
non-voting delegates.
Article 33.
The Directors, the General Manager, the Deputy General Manager, and
personnel from the financial department of the Company are not allowed to join
the supervisory board.
Chapter 6. Business Management Organization
Article 34.
The Joint Venture shall establish a management organization which will be
set up in accordance with the decision of the Board meeting.
Article 35.
The Joint Venture shall have one General Manager and several Deputy
General Managers who are engaged by the Board of Directors. The first General
Manager shall be nominated by Party A, and appointed by the Board of Directors.
The Deputy General Managers shall be nominated by the General manager and
appointed by the Board.
Article 36.
The General Manager is directly responsible to the Board of Directors. He
shall carry out the decisions of the Board of Directors, organize and conduct
the daily management of the Joint Venture. The Deputy General Managers shall
assist the General Manager in his work and act as the authorized representative
of the General Manager during his absence and exercise the functions of the
General Manager.
Article 37.
Decisions on the major issues concerning the day-to-day operations of the
Joint Venture shall be signed jointly by the General Manager and any one of the
Deputy General Managers. Issues which need co-signatures shall be specifically
stipulated by the Board of Directors.
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Article 38.
The initial term of office for the General Manager and Deputy General
managers shall be 3 years and may be renewable at the recommendation of the
Board of Directors.
Article 39.
At the recommendation of the Board of Directors, the Chairman,
Vice-Chairman or Directors of the Board may take executive position as the
General Manager, Deputy General Managers or other high- ranking personnel of the
Joint Venture.
Article 40.
The General Manager and Deputy General Manager shall not hold posts
concurrently as general manager or deputy general managers of other economic
entities in competition with the Joint Venture Company.
Article 41.
The General manager, Deputy General Managers, and other high- ranking
personnel who ask for resignation shall submit their written resignation reports
to the Board of Directors 30 days in advance.
In case any one of the above-mentioned persons conduct graft or serious
dereliction of duty, they may be dismissed at any time upon the decision of the
Board of Directors. Those who violate the criminal law shall be under criminal
sanction.
Chapter 6. Finance and Accounting
Article 42.
The finance and accounting of the Joint Venture shall be handled in
accordance with the "Stipulations of the Finance and Accounting System of the
Sino-Foreign Equity Joint Ventures" and other relevant regulations.
Article 43.
The fiscal year of the Joint Venture shall coincide with the calendar
year, i.e. from January 1 to December 31 on the Gregorian calendar.
Article 44.
All vouches, account books, statements and reports of the Joint Venture
Company shall be written in Chinese.
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Article 45.
The Joint Venture adopts Renminbi ("RMB") as its accounts keeping unit.
The conversion of RMB into other currency shall be in accordance with the
exchange rate at the date of conversion published by the State Administration of
Exchange Control of the People's Republic of China.
Article 46.
The Joint Venture shall open bank accounts in RMB and foreign currency
with the Bank of China and or other banks agreed by the Bank of China.
Article 47.
The Joint Venture shall adopt internationally used accrual basis and debit
and credit accounting system in preparation of its accounts.
Article 48.
The following items shall be included in the financial accounts books:
(1) All cash receipts and expenses of the Joint Venture;
(2) All purchases and sales of materials purchasing by the Joint Venture;
(3) The registered capital and indebtedness condition of the Joint
Venture;
(4) The time of payment, increase and assignment of the registered capital
of the Joint Venture.
Article 49.
The Joint Venture shall complete the balance sheet, the loss or profit
statement for the previous fiscal year within the lust three months of each
fiscal year, and shall then submit such financial statements to the Board
meeting for approval after having been examined and signed by the auditor.
Article 50.
Each party to the Joint Venture has the right to engage an auditor to
undertake annual review and examination of the accounting books and records of
the Joint Venture Company at its own expense. The Joint Venture shall provide
cooperation.
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Article 51.
The depreciation period for the fixed assets of the Joint Venture Company
shall be decided by the Board of Directors in accordance with the "Rules for the
Implementation of the Income Tax Law of the People's Republic of China
Concerning Sino-Foreign Equity Joint Ventures."
Article 52.
The matters concerning foreign exchange shall be handled in accordance
with the "Provisional Regulations for Exchange Control of the People's Republic
of China," and other pertaining regulations as well as the stipulations of the
Joint Venture Contract.
Chapter 7. Profits Sharing
Article 53.
The Joint Venture Company shall make appropriation to reserve funds,
expansion funds and the welfare and bonus fund for staff and workers from
distributable profits after income taxes. The amounts of such appropriations is
decided by the Board of Directors.
Article 54.
After taxes are paid and the various funds are appropriated, the remaining
profits may be distributed between the parties according to the proportion of
each party's share in the registered capital, except when the Board of Directors
unanimously agree otherwise.
Article 55.
A profit distribution plan shall be determined by the Board of Directors
and published within the first three months of each first fiscal year with
respect to profits attributed to the immediately preceding fiscal year.
Article 56.
The Joint Venture shall not distribute profits unless the losses of prior
fiscal year have been made up. Undistributed profits from the prior years can be
distributed together with that of the current year.
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Chapter 9. Staff and Workers
Article 57.
The employment and dismissal of the staff and workers of the Joint Venture
and their salaries, welfare benefits, labor insurance and protection, and other
matters shall be handled in accordance with the "Regulations of the People's
Republic of China on Labor Management in Sino-Foreign Equity Joint Ventures" and
its implementation rules.
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Article 58.
The staff and workers to be employed by the Joint Venture will be
recruited through public selection examinations. The staff and workers of Party
A shall have the preemptive right.
Article 59.
The Joint Venture has the right to take disciplinary actions, concluding
demerit, salary reduction, against any employee who violates the rules and
regulations of the Joint Venture. Dismissal shall be used only in serious case
and a report thereof shall be filed with local labor administrative authority.
Article 60.
The salaries of the employees shall be determined by the Board of
Directors according to the business conditions of the Joint Venture, and the
laws and regulations of China, and shall be specified in detail in the labor
contract. The salary of the staff and workers shall be increased correspondingly
with the development of production and the improvement of the production
capability of the staff and workers.
Article 61.
Matters concerning the welfare, bonuses, labor protection, insurance, etc.
shall be stipulated respectively in various rules of the Joint Venture to ensure
that the staff and workers are working under normal conditions.
Chapter 10. The Trade Union Organization
Article 62.
The staff and workers of the Joint Venture have the right to establish
trade union organization and carry out activities in accordance with the
stipulations of the "Trade Union Law of the People's Republic of China."
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Article 63.
The trade union in the Joint Venture is representative of the interests of
the staff and workers. The duties of the trade union are: to protect the
interests of the staff and workers: to discuss with the Joint Venture Company on
matters regarding the welfare of the staff and workers; to unite and educate
staff and workers: to fulfil production plans: to observe labor discipline; to
implement the labor contract.
Article 64.
The trade union of the Joint Venture may provide assistance and guidance
to help the staff and workers to enter into personal labor contracts with the
Joint Venture or to sign collective labor contract on behalf of the staff and
workers with the Joint Venture and to supervise the implementation of the labor
contracts.
Article 65.
Persons in charge of the trade union of the Joint Venture shall have the
right to attend as non-voting members and to report the opinions and demands of
staff and workers to meetings of the Board of Directors held to discuss matters
such as the staff and worker's salary, rewards and penalties' welfare benefits,
labor protection and labor insurance and labor discipline.
Article 66.
The trade union shall take part in the mediation of disputes arising
between the staff and workers and the Joint Venture.
Article 67.
The Joint Venture shall allot an amount of funds totaling 2% of all the
salaries of the staff and workers of the Joint Venture as trade union's funds,
which shall be used by the trade union in accordance with the "Managerial Rules
for the Trade Union Funds" promulgated by the All China Federation of Trade
Unions.
Chapter 11. Duration, Termination and Liquidation
Article 68.
The duration of the Joint Venture shall be 30 years, beginning from the
day the business license is issued.
Article 69.
An application for the extension of duration shall. if proposed by both
parties and approved at the Board Meeting, be submitted to the original
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examination and approval authority six months prior to the expiry date of the
Joint Venture. Only upon the approval by the original examination and approval
authority may the duration be extended. The Joint Venture shall go through all
registration formalities for the extension with the original registration
office.
Article 70.
The Joint Venture may be terminated before its expiration in case the
parties to the Joint Venture agree unanimously that the termination of the Joint
Venture is for the best interests of the parties.
The proposal to terminate the Joint Venture before the duration expires
shall be decided by the Board of Director through a plenary meeting, and the
decision shall be submitted to the original examination and approval authority
for approval.
Article 71.
Either party shall have the right to terminate the Joint Venture in case
one of the following events occur:
(1) expiration of the tenure of the Joint Venture;
(2) the Joint Venture incurs heavy loses continuously in successive years
or its inability to continue operation;
(3) the violation of the provisions of the Joint Venture Contract or the
Articles of Association by any party which causes the Joint Venture unable of
continuing its operations and achieving its business purpose stipulated by the
Contract; and
(4) in case of inability to fulfill the Joint Venture Contract due to
force majeure.
In case of termination and liquidation resulting from Clauses 2, 3 and 4,
the decision to terminate the Joint Venture must be approved by the original
examination and approval authority. In case of termination resulting from Xxxxxx
3, the party who fails to fulfill the obligations shall be liable to the
economic losses that are caused to the Joint Venture.
Article 72.
Upon the expiration or termination of the Joint Venture before its
duration expires, a liquidation committee should be set up in accordance with
"the Regulations for the Implementation of the Joint Venture Law" to undertake
the liquidation of the Joint Venture's assets.
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Article 73.
The duties of the liquidation committee are: to conduct the liquidation
through check of the assets of the Joint Venture, its claim and indebtedness; to
work out the statement of assets and liabilities and list of assets and to
formulate a liquidation plan. All of such duties shall be carried out upon the
approval by the Board of Directors.
Article 74.
During the process of liquidation, the liquidation committee shall
represent the Joint Venture to sue and be sued.
Article 75.
The liquidation expenses and remuneration to the members of the
liquidation committee shall be paid in priority from the existing assets of the
Joint Venture.
Article 76.
During the liquidation, the liquidation committee shall re-evaluate the
Joint Venture's assets with reference to book value of the assets and the
prevailing market price.
Article 77.
The remaining assets after the clearance of debts of the Joint Venture
shall be distributed between the parties to the Joint Venture according to the
proportion of each party's share in the registered capital.
Article 78.
On completion of the liquidation, the Joint Venture shall submit a
liquidation report to the original examination and approval authority, cancel
its registration in the original registration office and hand in its business
license, and at the same time, make an announcement to the public.
Article 79.
After winding up of the Joint Venture, its account books and records shall
be kept by Party A.
Chapter 12. Rules and Regulations
Article 80.
The following are the rules and regulations to be formulated by the Board
of Directors of the Joint Venture:
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(1) Management regulations, including the powers and functions of the
managerial branches and its working rules and procedures;
(2) Rules for the staff and workers;
(3) System of labor and salary;
(4) System of work attendance record, promotion, awards and penalty for
the staff and workers;
(5) Detailed rules concerning staff and worker's welfare:
(6) Financial system;
(7) Liquidation procedures upon the dissolution of the Joint Venture;
(8) Other necessary rules and regulations.
Chapter 13. Supplementary Articles
Article 81.
Any amendments to the Articles of Association shall be unanimously agreed
and decided by the Board of Directors and submitted to the original examination
and approval authority for approval.
Party A: Party B:
LIUZHOU OVM JOINT STOCK CO., LTD. KOLCARI INVESTMENTS LTD.
By:______________________________ By:__________________________
Xx Xxx Xxx Xxxxx Xxxx Xx
Dated: April 18, 1995
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