CONTRAC OF A CHINESE-FOREIGN EQUITY JOINT VENTURE
(For Reference Only, Chinese Edition is Required Upon Application)
CHAPTER I
GENERAL PROVISIONS
Party A and Party B, in accordance with the “Law of the People’s Republic of China
(“PRC”) on Chinese-Foreign Equity Joint Ventures” and the “Regulations for the
Implementation of the Law of the PRC on Chinese-Foreign Equity Joint Ventures”, each as
amended (collectively the “Joint Venture Law”) and other relevant PRC laws and
regulations, through friendly consultations and in conformity with the principles of equality
and mutual benefit, have agreed to invest in and set up jointly an equity joint venture
company in Xiamen Municipality, Fujian, PRC. The parties formulate the terms and
conditions contained herein.
CHAPTER II
PARTIES TO THE JOINT VENTURE
Article 1 The parties to this contract are as follows:
(a) Xiamen XXX Co. Ltd. (“Party A”) incorporated in Xiamen, Fujian, PRC with its
legal address at XXX, Xiamen, Fujian, PRC.
Legal representative: Name:
Position:
Nationality:
(b) XXX Ltd. (“Party B”) incorporated in XXX with its legal address at XXX.
Legal representative: Name:
Position:
Nationality:
CHAPTER III
ESTABLISHMENT OF THE JOINT VENTURE COMPANY
Article 2 In accordance with the Joint Venture Law and other relevant PRC laws and
regulations, the parties to the joint venture agree to set up a joint venture limited liability
company in the PRC (the “JVC”).
Article 3 The name of the JVC is Xiamen XXX Co. Ltd. The legal address of the JVC is at
XXX, Xiamen, Fujian, PRC.
Article 4 All activities of the JVC shall be governed by the laws, decrees and relevant rules
and regulations of the PRC and the JVC shall be subject to the jurisdiction and protection of
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PRC laws.
Article 5 The organization form of the JVC is a limited liability company. Each party to the
JVC is liable for the debts of the JVC within the limit of the capital subscribed by it.
Profits, risks or losses of the JVC shall be shared by the parties in accordance with the
proportion of their respective contributions to the registered capital set forth in Article 14.
CHAPTER IV
PURPOSE, SCOPE OF BUSINESS AND PRODUCTION RISKS
Article 6 The purpose of the JVC is in conformity with the wish of strengthening the
economic co-operation and technical exchanges in order to improve product quality,
develop new products and gain competitive position in local and world markets in terms of
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 party.
Article 7 The productive and business scope of the JVC is to produce XXX …necessary for
domestic and export sales by both Parties and to study and develop new products in the
XXX industry.
The JVC may expand or limit its scope and scale of production, develop and sell new
products and discontinue the production and sale of certain products as the board of
directors of the JVC may determine in accordance with changes in market demands and
other factors.
Article 8 The JVC shall erect production plants at locations which offer low factor costs
including, without limitation, direct labour and utilities, and provide easy transportation
access, telecommunications, broadband internet service, and proximity to management and
engineering talent pool.
The initial ideal locations include XXX Industrial District in Xiamen and XXX….
Article 9 The Products manufactured by the JVC and sold by Party A and Party B shall be
branded under the name of both Parties respectively and, in the event that this is not
practical to do so, then only part number(s) instead of brand label shall be applied to
internal PCB.
Article 10 The parties shall not consider external OEM production arrangements in respect
of the Products without first offering the JVC the right of first refusal to accept the
production order. The parties agree that demand from their customers shall be supported
by the JVC save and except in the circumstances that the JVC has confirmed that it is
unable to meet such demand in terms of production technology, quality, time and costs
requirements.
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Article 11 Party A agrees to cease its production functions when the JVC starts operations.
The remaining materials and equipment of Party A shall be acquired by the JVC when the
JVC starts operation at a price set out in the valuation report issued by the valuation
authority.
Party B agrees that forthwith after the execution of this contract, it shall channel its PRC
sourcing volume totally to the JVC for production with the exception of the minimum
guaranteed volume committed to its existing sourcing partner, XXX. Party B shall
terminate its sourcing obligations to XXX within six (6) months from the establishment of
the JVC. Such retracted volume shall then be channelled to the JVC for production.
The parties agree that they may retain their own marketing and sales and product
development departments.
If either party develops a brand new product and decides to manufacture that new product
in the PRC, then the JVC shall have the right of first refusal to manufacture the same and
the other party may market and sell such brand new product subject to payment of a
product development fee as mutually agreed between the parties to the party which
develops such brand new product.
The JVC may set up a product development department to develop new products. Both
Parties may market and sell such new products without paying any fees.
Article 12 The parties shall pay in accordance with the agreed price and the payment
schedule in the event that the production process in respect of the production orders made
by them has completed. The JVC shall not accept any cancellation or rescheduling of
production orders from either party.
Both parties shall bear all costs and losses suffered by the JVC arising out of the
cancellation or rescheduling of orders once the production process in respect of the orders
made by it has commenced but not yet completed.
The party rescheduling the orders shall not be liable for the costs and losses suffered by the
JVC arising from such rescheduling of orders if the supplier(s) of the materials required for
the production of the Products in order to meet the orders has (have) not demanded the JVC
to pay the costs of such materials on time and, in such circumstances, such materials shall
be stored by the JVC. However, the party rescheduling the orders shall, within six (6)
months from the date of rescheduling, determine the manner for the disposal of such
materials, failing which such party shall be deemed to have cancelled the orders and shall
be liable for all costs and losses suffered by the JVC arising therefrom.
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CHAPTER V TOTAL AMOUNT OF INVESTMENT AND REGISTERED
CAPITAL
Article 13 The total amount of investment of the JVC shall be United States dollars (“US$”)
eight (8) million (or equivalent in other foreign currency agreed upon by the parties).
Article 14 The registered capital of the JVC shall be US$4 million (or equivalent in other
foreign currency agreed upon by the parties), of which Party A shall contribute US$XX
being converted into Renminbi which accounts for xx%, Party B shall contribute US$XX
which accounts for XX%. As provided for in Article 16, the parties’ contributions may take
the form of cash and/or contributions in kind.
Both parties unanimously agree not to increase their respective capital contributions to the
JVC’s registered capital during the duration of the JVC. The remainder of the total
amount of investment of US$XX shall be raised by way of funds borrowed by the JVC.
Article 15 The US$xx registered capital contributions shall be initially appropriated as
follows:
(a)
(b)
(c)
(d)
US$ xx shall be applied to plant erection;
US$ xx shall be applied to purchase of production equipment;
US$ xx shall be applied to inventory and materials; and
US$ xx shall be used as working capital.
Article 16 Party A and Party B shall contribute the following as their investments:
Party A: Machines and equipment: US$ xx
Party B: Cash: US$ xx
Machines and equipment: US$ xx
Materials: US$ xx
Article 17 Party A and Party B shall bring complementary strengths to the JVC as follows:
Party A: (a) PRC customer base;
(b) Local PRC material sourcing;
(c) Product design and production technology;
(d) Industry management;
(e) Local PRC operations management; and
(f) A comprehensive organisation chart and staff.
Party B:
(a)
(b)
(c)
(d)
Global customer base;
Customer service;
High-value product design technology;
Production technology;
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(e) Production management system; and
(f) Production cost control.
Article 18 The registered capital of the JVC shall be paid in three (3) instalments by Party
A and Party B according to their respective percentage of capital contributions referred to in
Article 14. Each instalment shall be as follows:
(a)
(b)
(c)
US$xx shall be made within one (1) month from the date of issuance of the
business licence, of which Party A shall contribute US$xx and Party B shall
contribute US$xx;
US$xx shall be made before (Date), of which Party A shall contribute US$xx
and Party B shall contribute US$xx; and
US$xx shall be made before (Date), of which Party A shall contribute US$xx
and Party B shall contribute US$xx.
Article 19 After either party has made a required contribution to the JVC’s registered capital,
the JVC shall, on the basis of a verification report made by a firm of accountants lawfully
registered in the PRC and selected by the board of directors, issue to such party an investment
certificate evidencing payment of its contributions as of the date of each payment.
CHAPTER VI
TRANSFER OF INTEREST
Article 20
(1) During the term of this contract, no party may sell, assign, pledge, give or otherwise
dispose of all or any part of its interest in the JVC without the prior written consent of the
other party and the approval of the examination and approval authority.
(2) The Transferor Party shall assist the JVC in applying to the examination and approval
authority with regard to the approval of the transfer pursuant to Article 20(1) above.
(3) The Transferor Party shall ensure that the transferee of an interest in the JVC
(including all or part of the interest transferred) shall execute a deed of adherence so as to
assume the corresponding obligations and responsibilities of the Transferor Party as
stipulated in this contract or in the case of the transfer of part of an interest such obligations
and responsibilities as are commensurate with such part.
(4) Upon any transfer by a party of all or any part of its interest in the JVC pursuant to this
Article 20, the Transferor Party shall return to the JVC for cancellation of its investment
certificate issued by the JVC, and the JVC shall issue in its place a new investment
certificate to the transferee.
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CHAPTER VII
RESPONSIBILITIES OF EACH PARTY TO THE JVC
Article 21 The parties shall be respectively responsible for fulfilling the following matters:
(1) Responsibilities of Party A:
(a) Assisting in handling applications for approval, registration and other matters for the
establishment of the JVC in the PRC;
(b) Assisting in applying to the authority in charge of the land for right to the use of a site;
(c) Assisting in organizing erection of production plant on the site and other engineering
facilities of the JVC;
(d) Providing machinery and equipment and others as stipulated in Article 16;
(e) Assisting Party B in processing import customs declaration for the machinery and
equipment contributed by Party B as investment and arranging transportation of the
aforesaid within the PRC;
(f) Assisting the JVC in purchasing or leasing equipment, articles for office use, means of
transportation and communication facilities etc. within the PRC;
(g) Assisting the JVC in connecting utilities including the supply of water, electricity and
telecommunications facilities, etc.;
(h) Assisting the JVC in recruiting local PRC management personnel, technical personnel,
workers and other required personnel;
(k) Handling other matters necessarily required by the JVC from time to time.
(2)
Responsibilities of Party B:
(a)
Injecting cash and providing machinery and equipment and others as stipulated
in Article 16;
(b)
Handling matters of the JVC such as selecting and purchasing machinery and
equipment outside the PRC, etc.;
(c)
Participating in the selection of production supervisors and material sourcing
supervisors;
(d)
Providing its computerized production and inventory management system as
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required under Article 22;
(e)
Assisting in training technical personnel and workers of the JVC; and
(f)
Handling other matters necessarily required by the JVC from time to time.
CHAPTER VIII
PROVISION OF TECHNOLOGY AND INDUSTRIAL PROPERTY
Article 22 Party B agrees to provide its comprehensive and highly efficient computerized
production including inventory management system to be used by the JVC free of charge.
It will take two (2) to three (3) months’ time to install the system. The JVC shall be entitled
to make changes to the system as necessary upon unanimous resolution of the board of
directors.
Article 23 The parties agree that the system mentioned in Article 22 is granted by a licence
from Party B to the JVC during the duration of the JVC for its sole use. Party B shall not
withdraw such licence during the term of the JVC. The system remains the sole property of
Party B.
Article 24 All technology, know-how, techniques, software, proprietary databases, trade
marks, logos, trade secrets, trade practices, methods, specifications, drawings, designs and
other proprietary information, whether registered or not, disclosed by any party to the JVC
under the terms of this contract, or developed by the JVC, as well as the terms of this
contract and other confidential business and technical information (collectively
“Confidential Information”) shall be used by the JVC and its personnel solely for the
JVC’s account and purposes. Each party and the JVC shall maintain the secrecy of all
Confidential Information and shall not disclose or reveal any such Confidential Information
to any third party without the prior written authorization from the board of directors or the
disclosing party, as the case may be.
Article 25 The Products of the JVC shall be sold in the domestic market and overseas
markets.
Article 26 Party B shall appoint XX Industrial Limited, a company incorporated in (Place)
as its trading company to purchase from the JVC for sales of the Products that will occur
outside of the PRC. Any sales of the Products that will occur directly in the PRC shall be
invoiced by the JVC.
Article 27 The selling price of the products shall be calculated by the following formula:
Selling price
per unit
=
(material costs (inclusive of taxes) × 1.01) +
(standard production time ×
average hourly rate of the required manpower)
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0.85
The above formula shall not be changed however the data shall be subject to adjustments as
unanimously approved by the board of directors from time to time.
Article 28 If the pricing level to domestic customers of Party B incorporates a net margin
higher than the selling price of the Products as stipulated in Article 27, the JVC shall, after
payment of the applicable taxes, pay all remaining profits deriving therefrom to Party B.
Article 29 All parties shall pay the JVC within ninety (90) days from the date of invoice
and shall absorb their respective collection and bad debts costs for such sales.
All parties may be given the option to pay beyond ninety (90) days from the date of invoice
provided that they shall pay interest to the JVC at prevailing lending rates of banks in the
PRC until the Payment is satisfied in full. The JVC shall review the payment status of the
customers every two (2) weeks.
Article 30 Party A shall not sell any products to Party B’s customers worldwide. Party B
shall not sell any products to Party A’s customers worldwide. Both parties will exchange
customer lists on a periodic basis. Customers mean those with whom Party A and Party B
are in the process of quoting or sampling or do business with.
CHAPTER X
BOARD OF DIRECTORS
Article 31 The date of registration of the JVC shall be regarded as the date of the
establishment of the board of directors of the JVC.
Article 32 The board of directors shall be composed of three (3) directors, of which one (1)
shall be appointed by Party A and two (2) shall be appointed by Party B. The chairman
shall be appointed by Party B and the vice chairman shall be appointed by Party A.
Article 33 The terms of offices for the directors, chairman and vice chairman shall be four
(4) years and may be renewed if continuously appointed by the appointing party. Each of
Party A and Party B shall have the right, at any time, to remove and replace any director
appointed by it, before the expiration of his term.
Article 34 The board of directors shall be the highest authority of the JVC, and shall direct
the overall management, supervision and control of the business of the JVC. With respect
to the major issues set forth below, decisions shall be made only upon unanimous
resolution:
(a) Any changes to the articles of association of the JVC;
(b) Any liquidation or winding up of the JVC;
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(c) Any increase, decrease or transfer of interest in the registered capital of the JVC;
(d) Any amalgamation, consolidation or merger with any other company;
(e) The appointment and dismissal of the general manager;
(f) The distribution of profits of the JVC referred to in Article 55; and
(g) The selling price of the Products.
With respect to other matters, approval by a simple majority of the directors shall be
required.
Article 35 The chairman of the board shall be the legal representative of the JVC. If the
chairman is unable to exercise his responsibilities for whatever reason, he shall authorize
the vice-chairman or any other director to act on his behalf on a temporary basis.
Article 36 The board of directors shall convene at least one (1) meeting every year. The
meeting shall be called and presided over by the chairman of the board. The chairman shall
convene interim meetings based on a proposal made by more than one third of the total
number of directors. Minutes of the directors’ meetings shall be placed on file. The powers
of the board of directors and the proceedings of board meetings shall be set forth in the
articles of association of the JVC.
CHAPTER XI
MANAGEMENT OFFICE
Article 37 The JVC shall establish a management office which shall be responsible for its
daily management. The JVC shall adopt a general manager responsibility system.
The management office shall have a general manager nominated by Party A and a deputy
general manager nominated by Party B. Party B shall be entitled to nominate the chief
financial officer.
The general manager, deputy general manager and chief financial officer shall be appointed
by the board of directors in accordance with the nominations of the respective parties
pursuant to this Article 37 whose terms of office shall be four (4) years
Article 38 The responsibility of the general manager is to carry out the decisions of the
board of directors, organize and conduct daily management of the JVC.
The deputy general manager shall assist the general manager in his work.
The chief financial officer shall supervise the progress of financial affairs of the JVC and
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report such progress to the board of directors at any time.
If the deputy general manager and the chief financial officer are unfit for their position or
seriously affect the normal operations of the JVC, the general manager shall propose to the
board of directors to dismiss them.
Article 39 Department supervisors may be appointed by the management office. They shall
be answerable to the general manager for the work in their respective departments of the
JVC and handle matters given to them by the general manager.
The directors appointed by Party B shall be entitled to participate in the selection of
production, engineering, material sourcing and quality control supervisors.
Article 40 In case of graft or serious dereliction of duty on the part of the general manager,
the deputy general manager and the chief financial officer, the board of directors shall have
the power to dismiss them at any time.
CHAPTER XII
PURCHASE OF MATERIALS AND EQUIPMENT
Article 41 In its purchase of required raw materials, equipment, fuel, parts, means of
transportation and articles for office use, etc, the JVC shall purchase the same in the PRC or
international markets in accordance with fair and prudent principles.
CHAPTER XIII
LABOUR MANAGEMENT
Article 42 Labour contracts covering the recruitment, employment, dismissal and
resignation, wages, labour insurance, welfare, rewards, penalty and other matters
concerning the staff and workers of the JVC shall be drawn up between the JVC and the
trade union of the JVC collectively or individually in accordance with the “PRC Labour
Law” and the “Regulations of the PRC for Labour Management in Chinese-Foreign Equity
Joint Ventures and its Implementation Rules”.
The labour contracts shall, after being signed, be filed with the local labour management
department for record.
Article 43 The appointment of high-ranking administrative personnel, their salaries, social
insurance, welfare and the level of travelling expenses, etc. shall be decided by the board of
directors.
CHAPTER XIV
TAXES, FINANCE AND AUDIT
Article 44 The JVC shall pay taxes in accordance with the stipulations of PRC laws and
other relative regulations.
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Article 45 Staff members and workers of the JVC shall pay individual income tax
according to the “Individual Income Tax Law of the PRC”.
Article 46 Allocations for reserve funds, expansion funds of the JVC and welfare funds and
bonuses for staff and workers shall be set aside in accordance with the stipulations of the
relevant PRC laws. The annual proportion of allocation shall be decided by the board of
directors according to the business situation of the JVC.
Article 47 The fiscal year of the JVC shall be from January 1 to December 31. All
vouchers, receipts, books of account and financial statements and reports shall be written in
Chinese. The books of account and financial statements and reports shall also be written in
English.
Article 48 Financial checking and examination of the JVC shall be conducted by an auditor
registered in the PRC and the auditor’s reports shall be submitted to the board of directors.
Party B shall have the right to employ a foreign auditor registered in another country to
undertake annual financial checking and examination. The other party shall have no
objection to this provided that all the expenses incurred thereby shall be borne by Party B.
Article 49 In the first two (2) months of the second and each subsequent fiscal year, the
general manager shall instruct the chief financial officer to prepare previous year's balance
sheet, profit and loss statement and proposal regarding the distribution of profits and submit
them to the board of directors for examination and approval.
CHAPTER XV FOREIGN EXCHANGE
Article 50 The JVC shall comply with the “Law of the PRC on Foreign Exchange Control”
and the relevant laws and regulations in relation to its foreign exchange receipts and
expenditure.
Salaries and other income in Renminbi for foreign personnel and personnel from Hong Kong,
Macau and Taiwan may, after the payment of any taxes that may be applicable, be remitted
outside of the PRC in accordance with the PRC foreign exchange control regulations.
Article 51 The foreign exchange funds of the JVC shall be deposited in the foreign exchange
account(s) established by the JVC with financial institutions within or outside of the PRC as
approved by the PRC State Administration of Foreign Exchange Control. All foreign
exchange receipts and expenditure of the JVC shall be deposited in and paid out of the
above-mentioned foreign exchange account(s) in accordance with the PRC foreign exchange
control regulations.
Article 52 The parties agree that profits shall be distributed by the JVC to them in the same
currency as contributed by each party to the registered capital of the JVC. If the JVC has
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not generated sufficient foreign exchange receipts for both parties to receive their shares of
distributable profits that are due to them in foreign exchange, the parties shall receive the
balance of its distributable profits in Renminbi.
CHAPTER XVI
DISTRIBUTION OF PROFITS AND EXPANSION FINANCING
Article 53 Profits shall be distributed annually to all parties subject to the requirement of
retaining sufficient profits to support the intended growth plan of the JVC.
The level of retained profits shall be kept at a level that can support a minimum growth of
XX percent of the annual operating revenue for the first three (3) years of the JVC. Once
the annual operating revenue of the JVC exceeds US$xx million, the requirement of
retaining profits to sustain further growth may be diminished and the majority of profits
shall be distributed.
Article 54 Party B shall provide loans repayable within one (1) year in the same currency
as granted to the JVC during the first three (3) years of the JVC when such loans are
required to sustain the intended minimum XX percent annual growth. Such loans shall
carry an interest at a rate charged by the Xiamen Municipal Branch of the Bank of China
for loans of Renminbi in the same amount for the same period granted to companies similar
to the JVC.
CHAPTER XVII
DURATION OF THE JOINT VENTURE
Article 55 The duration of the JVC shall be XX years. The establishment of the JVC shall
start from the date on which the business licence of the JVC is issued.
Article 56 An application for the extension of the duration, if proposed by one party and
unanimously approved by the board of directors, shall be submitted to the examination and
approval authority six (6) months prior to the expiry date of the JVC.
CHAPTER XVIII
DISPOSAL OF ASSETS UPON DISSOLUTION
Article 57
(1) The JVC shall be dissolved and this contract terminated in accordance with the
procedures set forth in the Joint Venture Law, the articles of association and other officially
published laws and regulations,
(a) Upon expiration of its original term or any extension thereof, or
(b) If any of the conditions or events set forth below shall occur and be continuing, in
which case the parties shall cause their representatives on the board of directors, upon
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motion by any party, to unanimously adopt a resolution to dissolve the JVC:
(i) Inability to continue operations because of heavy losses suffered by the JVC;
(ii) Inability to continue operations because of an event of force majeure (as defined in
Article 69;
(iii) Material failure of any party to perform its obligations under this contract if, in the
reasonable opinion of the non-defaulting party, such non-performance defeats the economic
objectives of this contract and affects the continuation of the JVC or creates a material loss
to such non-defaulting party or materially and adversely affects the interest of the JVC;
(iv) Failure of any party to make its contributions in accordance with its interest in the
JVC’s registered capital, in accordance with the provisions of Chapter V of this contract,
where such failure continues for a period of more than three (3) months;
(v) The purchase by any party of all the interest of the other parties in the JVC pursuant to
Article 20;
(vi) Issuance of an order by the PRC government to cease operations because of serious
violations by the JVC of PRC law; or
(vii) The occurrence of any other events pursuant to which the parties mutually agree to
dissolve the JVC.
(2) After the board of directors resolves to dissolve the JVC pursuant to Article 57(1), the
JVC and the parties shall take all reasonable steps to accomplish such dissolution in
accordance with relevant, officially published laws and regulations, and the board of
directors shall apply to the examination and approval authority for approval of such
dissolution.
Article 58 If the board of directors adopts an unanimous resolution pursuant to Article 57 to
dissolve the JVC (with the exception of a resolution adopted as a result of the event stipulated
in Article 57 (1)(b)(v)), any party shall have the right to elect to continue the business of the
JVC, subject to any required governmental approvals. The party making such an election (the
“Purchasing Party”) shall be obligated to purchase the other parties’ interest in the JVC at a
price calculated as follows:
(a) The party not exercising its right to elect to continue the business of the JVC (the
“Selling Party”) and the Purchasing Party shall discuss and agree upon a purchase price of
the interest of the Selling Party (the “Purchase Price”) which shall in all cases reflect the
going concern value (including goodwill) and the projected future profitability of the JVC.
The method of calculating the Purchase Price shall be as follows:
(i) The net asset value of the JVC, to be determined by a balance sheet effective on the
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date of adoption by the board of directors of a resolution pursuant to Article 57 to dissolve
the JVC, multiplied by the percentage of the JVC’s registered capital contributed by the
Selling Party, plus
(ii) An additional payment to be negotiated in good faith to reflect the going concern value
and future estimated long-term profitability of the JVC, taking into account the market
value of listed shares of companies in similar manufacturing industries in the PRC, Europe,
Asia and the United States of America and internationally accepted accounting principles
relevant to the determination of going concern value.
(b) If within sixty (60) days of the adoption of a resolution to dissolve the JVC, the Selling
Party and Purchasing Party cannot agree on the Purchase Price, the parties hereto shall
constitute a valuation committee (the “Valuation Committee”) to value the interest(s) of
the Selling Party by reference to the principles set forth in Article 58(a).
The Valuation Committee shall consist of three members. The Selling Party shall select one
member, the Purchasing Party shall select one member and the third member shall be
selected by the first two members. The Selling Party and the Purchasing Party shall be
bound to carry out the sale and purchase in accordance with the valuation determined by the
Valuation Committee.
(c) After the Purchase Price has been agreed by the Selling Party and the Purchasing Party
or otherwise determined in accordance with Articles 58(a) and (b), the parties shall use their
best efforts to secure all necessary governmental approvals and comply with all
administrative procedures required in connection with the purchase.
Payments of the Purchase Price shall be made by the Purchasing Party to the Selling Party
in the same currency as contributed by the Selling Party to the registered capital of the JVC
within thirty (30) days following the execution of the relevant agreement for sale and
purchase of shares.
Article 59
(1) If, upon the expiration of the term of the JVC or upon any earlier proposed dissolution
of the JVC, no party wishes to continue the JVC’s business either on its own or together
with a third party, the board of directors shall formulate liquidation procedures and
principles, establish a liquidation committee (the “Liquidation Committee”) to liquidate
the property of the JVC, and submit its proposals to the examination and approval authority
for verification.
(2) The Liquidation Committee shall be responsible for thoroughly examining and
ascertaining the property, credits and debts of the JVC, prepare the statement of assets and
liabilities and list of inventory and property, and formulate a liquidation plan for submission
to the board of directors for unanimous approval.
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(3) Within thirty (30) days after the Liquidation Committee has disposed of the JVC’s
assets and discharged all JVC’s debts, the Liquidation Committee shall divide and distribute
the remaining property of the JVC to the parties in accordance with the ratio of their
ownership of the registered capital.
(4) In distributing the remaining property of the JVC by the Liquidation Committee,
payment of amounts due to each party shall be made in the same currency as contributed by
such party to the registered capital.
Article 60 After the liquidation of the JVC is completed, the Liquidation Committee shall
promptly submit a report thereon to a meeting of the board of directors for approval and
submission to the examination and approval authority, and shall carry out the procedures for
cancelling the registration of the JVC’s business licence at the original registration office.
Article 61 The rights of the parties arising in respect of any breach of this contract occurring
prior to the date of the JVC’s dissolution or liquidation shall remain in full force and effect.
Article 62 Upon expiration or early termination of this contract or the dissolution of the
JVC in accordance with the provisions of Chapter XVIII of this contract, each party agrees
that neither it nor its successors in interest nor any other successors in interest of the JVC
shall use the name of XXX or any JVC trademark or any name or trademark similar thereto.
Each of the parties shall retain the ownership of its brand name and shall during the term of
the JVC or for a period of three (3) years after dissolution of the JVC retain the ownership
of its customer list and the business mentioned therein which said business shall not
compete with the businesses of the other parties.
Article 63 Each of the parties shall not at any time during the term of this contract or for a
period of three (3) years after termination of this contract either solely or jointly or
otherwise carry on or be interested in any business which shall directly or indirectly
compete with the business of the JVC.
CHAPTER XIX
INSURANCE
Article 64 Insurance policies of the JVC on various kinds of risks shall be underwritten
with insurance companies authorized to do business in the PRC. The types, value and
duration of insurance shall be decided by the board of directors.
CHAPTER XX
AMENDMENT AND ALTERATION OF THE CONTRACT
Article 65 Any amendment of this contract shall come into force only after a written
agreement in both Chinese and English texts and signed by the legal representatives of each
of the parties under the company chop which shall be approved by the original examination
and approval authority.
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If one party proposes to amend this contract however the two parties cannot reach an
unanimous agreement and sign the amended contract, then the parties shall continue to
perform under the terms of this contract.
The Chinese and English texts of the amended contract shall have equal validity and legal
effect.
CHAPTER XXI
LIABILITIES FOR BREACH OF CONTRACT
Article 66 If the JVC is unable to operate or achieve the business purpose stipulated in this
contract due to the fact that one of the parties fails to fulfil its obligations prescribed by this
contract or the articles of association, or fails to continue its performance under the terms of
this contract when all the parties have failed to reach an unanimous agreement to any
amendments proposed by it and execute the amended contract, such party shall be deemed
to have breached this contract.
On the occurrence of the event mentioned above, the non-defaulting party shall have the
right to terminate this contract in accordance with the provisions of this contract and claim
damages against the defaulting party. In case both parties agree to continue the operation,
such defaulting party shall be liable for the economic losses caused thereby to the JVC.
Article 67 If any party fails to pay contributions in accordance with the schedule as set out
in Chapter V herein, the defaulting party shall, for each month of arrears, pay to the
non-defaulting party 3% of the contribution that should have been made within the
specified time limit as liquidated damages. If the defaulting party fails to pay after three
(3) months in arrears, an accumulative total of 9% of that relevant contribution shall be paid
to the non-defaulting party as liquidated damages. In addition, the non-defaulting party
shall have the right to terminate this contract and claim damages from the defaulting party
in accordance with the stipulations of Article 57 herein.
The liquidated damages referred to in this Article 67 shall be shared by the non-defaulting
party in accordance with the ratio of their respective total contributions already paid to the
JVC at the time of default by the defaulting party.
Article 68 If all or part of this contract cannot be fulfilled owing to the fault of one party,
the defaulting party shall bear all responsibilities caused thereby and shall indemnify and
hold the non-defaulting party harmless in respect of any cost, liability or loss (including
attorneys’ fees) suffered or incurred by such non-defaulting party. If it is the fault of both
parties, they shall bear their respective responsibilities caused thereby.
CHAPTER XXII
FORCE MAJEURE
Article 69 If any party is prevented from performing any of its obligations under this
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contract by force majeure, such as earthquake, typhoon, flood, fire and war and other
unforeseen events, and their occurrence and consequences are beyond the reasonable
control of the party, the party relying on any of the aforesaid events shall notify the other
parties without any delay, and within fifteen (15) days thereafter provide a detailed report of
the event and valid documentary evidence issued by the relevant local authority explaining
the reason of its inability to execute or delay the execution of all or part of this contract.
The parties shall, through consultation, decide whether to terminate this contract or to
exempt part of the obligations of this contract from implementation or whether to delay the
execution of this contract depending on the effects of the event in relation to the
performance of this contract.
CHAPTER XXIII
APPLICABLE LAW
Article 70 The formation of this contract, its validity, interpretation, execution, amendment,
termination and settlement of disputes shall be governed by the laws of the PRC. When the
laws of the PRC do not cover a certain matter in this contract, international legal principles
and practices shall apply to resolve the dispute relating to that matter.
CHAPTER XXIV
SETTLEMENT OF DISPUTES
Article 71 Any dispute, controversy or claim arising out of or relating to this contract, or
the breach, termination or invalidity thereof, shall be resolved through friendly negotiations
and, if it cannot be resolved through negotiations within one month of the dispute,
controversy or claim being notified by one party to the other, it shall be settled by
arbitration in XX in accordance with XX Arbitration Rules as at present in force and as may
be amended by the rest of this Article. The applicable law during arbitration shall be the
laws of the PRC.
There shall be only one arbitrator. The language to be used in the arbitral proceedings shall
be English. The arbitral award shall be final and binding upon both parties.
Article 72 During the arbitration, the parties shall continue to perform this contract except
for matters in dispute.
CHAPTER XXV
LANGUAGE
Article 73 This contract shall be written in English version and in Chinese version. Both
versions shall be equally authentic. Each party acknowledges that it has reviewed the
English version and the Chinese version of this contract and that they are the same in all
material respects.
CHAPTER XXVI
EFFECTIVENESS OF THE CONTRACT AND OTHERS
Article 74 This contract shall come into force with effect from the date of approval by the
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examination and approval authority.
Article 75 Any notice given by a party must be in writing, either by personal delivery, by
facsimile (with a successful transmission report attached) or by post to the following
addresses and facsimile numbers:
Party A:
Add:
Attn:
Tel:
Fax:
Party B:
Add:
Attn:
Tel:
Fax:
Notices shall be deemed effectively given on the date of personal delivery if given by
personal delivery; on the date of successful transmission if given by facsimile; or seven (7)
days after posting if given by registered mail, postage prepaid.
In the event that there are any changes to the address and facsimile number of any party
during the term of the JVC, such party shall forthwith notify the other party and the JVC of
such changes in the manner aforementioned.
Article 76 This contract is signed at Xiamen, PRC by the authorized representatives of both
parties on XX (Date).
Party A
Party B
____________________________
Date:
____________________________
Date:
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