ARTICLES OF ASSOCIATION
BETWEEN: XIN HAI TECHNOLOGY DEVELOPMENT LTD., a corporation
formed under the laws of the People's Republic of
China with its legal address at Suite 210, Building B
▇▇. ▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇;
(hereinafter sometimes referred to as "Party A" or
as "Xin Hai")
AND: INFORNET INVESTMENT LIMITED., a corporation formed
under the laws of Hong Kong with its legal address
at 14th Floor, ▇▇▇▇▇▇▇▇▇ House, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇;
(hereinafter sometimes referred to as "Party B" or as
"Infornet")
NOW THEREFORE in consideration of the mutual covenants herein and adhering to
the principle of equality and mutual benefit and through friendly consultations,
the Parties hereto hereby agree as follows:
CHAPTER 1: GENERAL PROVISIONS
Article 1: Basis of the Articles of Association
In accordance with the Laws of the People's Republic of China on Sino-Foreign
Cooperative Joint Venture, other relevant Chinese laws and regulations, and the
Cooperative Joint Venture Contract signed in the City of Beijing on __ 1997 by
▇▇▇ ▇▇▇ as Party A and Infornet as Party B, the Parties hereby a formulate these
Articles of Association of the Joint Venture Company.
Article 2: Name and Legal Address of the Joint Venture Company
The name in Chinese of the Joint Venture Company is Pu Wei Si You ▇▇▇▇ ▇▇▇▇ ▇▇.
The name in English of the Joint Venture Company is Placer Technologies Corp.
The principal place of business and legal address of the Joint Venture
Company shall be located at, Suite ▇▇▇, ▇▇▇▇▇▇▇▇ ▇ ▇▇. ▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇;
The Parties agree that the Joint Venture Company may establish branches in other
areas of the other regions in China.
2
The Joint Venture Company may transfer its registered office to another place by
amending its articles, and such amendment shall become effective on the date
appearing on the approval document of the registration and administration
authorities.
Article 3: Names and Legal Addresses of the Parties
The name and legal address of Parties to the Joint Venture Company are as
follows:
Party A: XIN HAI TECHNOLOGY DEVELOPMENT LTD., a Chinese
corporation with its legal address at ▇▇▇▇▇ ▇ ▇▇,
▇▇▇▇▇▇▇▇ ▇ ▇▇. ▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇;
Party B: INFORNET INVESTMENT LIMITED., a Hong Kong corporation
with its legal address at 14th Floor, ▇▇▇▇▇▇▇▇▇
House, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇;
Article 4: Limited Liability Company
The Cooperative Joint Venture Company is a limited liability company.
Article 5: Legal Person
The Joint Venture Company has the status of a legal person and is subject to the
jurisdiction and protection of the laws of China. All its activities shall be
governed by Chinese laws, decrees and other legal rules and regulations which
may be applicable thereto.
Article 6: Seal and Logo
The Board of directors of the Joint Venture Company may determine the form of
the seal of the Joint Venture Company, and may amend it by ordinary resolution.
The seat may have both the Chinese and English forms of the Joint Venture
Company name. The seals shall be kept at the registered office of the Joint
Venture Company or in any other place determined by the Board of Directors.
The Joint Venture Company may adopt a logo which specifications may be
determined by the Board of directors.
3
CHAPTER 2: PURPOSE AND SCOPE OF JOINT VENTURE COMPANY
Article 7: General Purpose of the Joint Venture Company
The Joint Venture Company shall employ the latest scientific management methods
and advanced technology to ensure that the computer and telecommunications
technology services perform according to the most advanced international
standards. The Joint Venture Company shall demonstrate competitive capability in
the market place based on its engineering technology and quality of its service,
so as to maximize the economic results of the Joint Venture Company and ensure
satisfactory economic benefits for each Party.
The short term purpose of the Joint Venture Company is to establish computer and
telecommunications engineering service business in Beijing; the long term
purpose will be to expand the computer and telecommunications engineering
service business in China.
Article 8: Specific Purpose and Scope of the Joint Venture Company
The specific purpose and business scope of the Joint Venture Company is as
follows:
8.1 to manufacture and sell computer software.
8.2 to manufacture and sell computer network systems.
8.3 to manufacture and sell communications equipment.
8.4 to provide communication engineering services.
Article 9: Territory of the business
The Joint Venture Company shall conduct its business in Beijing and then in
other cities of China.
CHAPTER 3: TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
Article 10: Total investment and registered capital
The total amount of investment (registered capital and external financing) of
the Joint Venture Company is established at two million dollars U.S.
(US$2,000,000). Its registered capital is two hundred thousand dollars U.S.
(US$200,000) (or the equivalent amount in Renminbi determined at the time that
the registered capital is invested). The registered capital shall be contributed
by Party B.
4
Article 11: Time to Contribution
The registered capital of the Joint Venture Company shall be contributed within
six months from the date of the registration and obtaining business license of
the Joint Venture Company.
Article 12: Verification by a Registered Accountant
After the contribution in the registered capital are paid by the Parties to the
Joint Venture Company, a Chinese registered accountant selected by the Joint
Venture Company shall verify it and provide a certificate of verification.
According to this certificate, the Joint Venture Company shall issue an
investment certificate which includes the following items:
Name of the Joint Venture Company;
Date of the establishment of the Joint Venture Company;
Names of the Parties to the Joint Venture Company;
Amount of capital contributed by each Party and the form of the contribution;
Date of the contribution or date of satisfying capital contribution
conditions; and
The date of the issuance and number of the investment certificate.
Article 13: Transfer of the Capital Contribution or Participation
Should one Party assign all or part of its capital contribution or participation
in the Joint Venture Company or its investment consent shall be obtained from
the other Parties of the Joint Venture Company. When one Party assigns its
participation, the other Party has the right of first refusal. The terms and
conditions of the assignment to a third party cannot be more favorable than
those offered to other Parties.
Article 14: Increase and Assignment of Registered Capital
Any increase or assignment of the registered capital of the Joint Venture
Company shall be approved by the Parties and the Board of directors and
submitted to the original examination and approval authority for approval. The
registration procedures for changes shall be dealt with at the original
registration and administration office.
CHAPTER 4: BOARD OF DIRECTORS
Article 15: Board of Directors
The Joint Venture Company shall establish the Board of directors which is the
highest authority of the Joint Venture Company.
5
Article 16: Board Decisions
The Board of directors shall decide all major issues concerning the Joint
Venture Company. Its functions and powers are as follows:
16.1 Reviewing and approving the important reports submitted by the president.
16.2 Approving annual financial reports, budget or receipts and expenditures,
distribution plan of annual profits.
16.3 Responsible for making important rules and regulations of the Joint Venture
Company.
16.4 Deciding to set up branches.
16.5 Amending the Articles of Association of the Joint Venture Company with the
consensus of the Parties.
16.6 Discussing and deciding the termination of the Joint Venture Contract,
termination of the Joint Venture Company or merging with another economic
organization.
16.7 Deciding the engagement of high-rank officials such as the president, chief
engineer, Chief financial officer, auditor, etc.
16.8 Being in charge of the expiration of the Joint Venture Company and the
liquidation matters upon the expiration of the Joint Venture Company.
16.9 Other major issues which shall be decided by the Board of directors.
Article 17: Representation
The Board of directors of the Joint Venture Company will be composed of four (4)
directors, of which two (2) shall be appointed by Party A and two (2) by Party
B. The term of office for the directors is four (4) years. Their term of office
may be renewed if continuously appointed by the relevant Party.
Article 18: Chairman of the Board of Directors
The Chairman of the Board of directors shall be appointed by Party B.
Article 19: Appointing and Replacing a Director
When appointing and replacing directors, a written notice shall be submitted by
the relevant Party to the Board of directors. The Board of directors will
approve the appointing or replacing director by a resolution or minutes of
meeting.
6
Article 20: Legal Representation
The Chairman of the Board of directors is the legal representative of the Joint
Venture Company. If the Chairman cannot perform his duty for some reason, the
Parties shall appoint a director to be the temporary representative of the Joint
Venture Company.
Article 21: Board Meetings
The Board of directors shall convene at least one (1) meeting every year. The
Chairman may convene an interim meeting of the Board based on a proposal made by
more than two (2) directors of which there will be one (1) representative from
each of Party A and Party B.
The Parties may request that a meeting of directors be held by telephone
conference call, by giving at least two (2) business days' notice to all
directors, by telefax or by telephone.
All notices and minutes of the meetings shall be in Chinese and in English.
Article 22: Place of Meetings
The Board meeting will be held at the registered office of the Joint Venture
Company or at any other place as determined by the Chairman.
Article 23: Procedure of Meetings
Such Board meeting shall be called and presided by the Chairman. Should the
Chairman be absent, a director as agreed by both parties shall call and preside
the Board meeting. The Chairman shall be responsible for the proper conduct of
the meeting and shall submit any proposal upon which a vote of the directors is
required. At the commencement of each Board meeting, the Directors who are
present shall select one secretary who is not member of the Board of directors
to take the minutes of the meeting either in Chinese or in English, but who will
transcribe the minutes into Chinese or English, as the case may be.
Article 24: Written Notice
The Chairman shall give each director a written notice 30 days before the date
of the Board meeting (not less than 15 days in the special circumstance). The
notice shall cover the agenda, time and place of the meeting.
Article 25: Proxy
Should the director be unable to attend a meeting of the Board of directors, he
may present or send by telecopier to the Chairman a proxy in the following
written form authorizing another director to attend and vote on his behalf. In
case the director neither attends nor entrusts another to attend the meeting he
will be regarded as having been absent from the meeting.
7
"The undersigned,____________________________________________being a director of
PLACER TECHNOLOGIES CORP. hereby appoints (name and function of
Proxy___________________ ) the true and lawful attorney and proxy of the
undersigned with full power for and in the name and on behalf of the undersigned
to attend and to vote in respect of the matters mentioned in the agenda of the
meeting of the Board of directors, to be held at (address of the meeting)
_______________________on the date of __________________________________ and at
any adjournment thereof, with all powers which the undersigned could exercise if
personally present and acting.
Signed on_______________________________________________
(signature)______________________________________________"
(name)
Article 26: Quorum
Quorum at the meeting (including any adjourned meeting or any telephone
conference meeting) of the Board of directors shall consist of at least three
(3) directors.
If the quorum is not respected, the decisions adopted by the Board of directors
at such meeting are invalid.
Article 27: Detailed Written Minutes
The minutes of each Board meeting shall he made in both Chinese and English and
shall he signed for acceptance by all directors who attended the meeting either
in person or by proxy. The minutes shall be filed with the Joint Venture Company
and a copy thereof shall be remitted to each director.
Article 28: Issues to he Unanimously Agreed by at Least Five Directors of the
Board
The following issues shall require the unanimous consent of at least four (4)
directors of the Board of directors:
8
28.1 to approve the annual budgets;
28.2 to acquire property, both moveable and immovable, in one instance for a
consideration of or in twelve months its accrued amount is greater than or equal
to one hundred thousand dollars U.S. (US$ 100,000);
28.3 to deal with any negotiable or non-negotiable instruments which is for a
consideration in excess of US$100,000;
28.4 to borrow money on behalf of the Joint Venture Company or to provide the
security mortgage or guarantee to any other company;
28.5 to open and operate any bank accounts and to designate and change the
signatories to such accounts;
28.6 to make any amendment to the Articles of Association or to the Joint
Venture Contract;
28.7 to invest into any other company or enterprise, or to acquire any of the
shares or assets of any other company or enterprise;
28.8 to distribute any capital or profit of the Joint Venture Company after
Recoupment Date;
28.9 to issue, purchase or redeem any interest in the Joint Venture Company;
28.10 to increase the registered capital of the Joint Venture Company;
28.11 to merge or amalgamate the Joint Venture Company with any other company or
legal entity;
28.12 to deal with any matter concerning any transactions of the Joint Venture
Company which may result in a conflict of interest.
28.13 to change the business scope and the mode of operation of the Joint
Venture Company; 28.14 to terminal the Joint Venture Company before its
expiration, to declare that the Joint Venture Company becomes bankrupt of
insolvent;
28.15 to set up the branch of the Joint Venture Company.
CHAPTER 5: BUSINESS MANAGEMENT OFFICE
Article 29: Management Organization
The Joint Venture Company shall establish a management office which shall be
responsible for its daily management and operations. The Board of directors
shall appoint a president and several vice-presidents to form the management
office.
9
Article 30: President and Other High Level Management
The president (sometimes referred to as the general manager), the vice president
in charge of technology development and the chief engineer shall be nominees of
Party A. The vice-president (sometimes referred to as the deputy general
manager) acting as senior financial officer shall be a nominee of Party B. The
Board of directors may appoint other vice-presidents. The appointment term of
the president and of the vice-presidents shall be three (3) years.
Article 31: Responsibility of the President
The president shall be directly responsible to the Board of directors. He shall
carry out the decisions of the Board of directors, organize and conduct the
daily management and operation of the Joint Venture Company. He shall also make
reports and recommendations to the Board of directors for approval.
Article 32: Responsibility of the Vice-President
The vice-presidents shall assist the president. During the absence of the
president, the vice-president in charge of daily business shall exercise the
functions of the president.
Article 33: Management and Operation Committee
The president, the vice-presidents, senior financial officer and chief engineer
shall constitute a Management and Operation Committee (the "M&O Committee") to
ensure and promote the effective and timely management of the affairs of the
Joint Venture Company.
Article 34: Plurality of Offices
At the invitation of the Board of directors, the Chair-man, or directors of the
Board of directors may concurrently be president, vice-president or other high
ranking personnel of the Joint Venture Company.
Article 35: Conflict of Offices
The president or vice-presidents shall not concurrently be president or
vice-president, or have any substantial interest (directly or indirectly) in any
economic organization which is in competition (directly or indirectly) with the
Joint Venture Company.
Article 36: Remuneration
The remuneration of president, vice-president, chief engineer and senior
financial officer shall be fixed from time to time by a resolution of the Board
of directors.
10
Article 37: Written Resignations
The president, vice-presidents, chief engineer, senior financial officer and
other high-ranking personnel who ask for resignation shall submit their written
resignations to the Board of directors in advance.
Any of the above-mentioned persons may be dismissed at any time upon the
decision of the Board of directors in the event of fraud or willful misconduct.
Anyone who violates the criminal law shall be subject to criminal sanction.
CHAPTER 6: FINANCE AND ACCOUNTING
Article 38: Finance and Accounting
The finance and accounting of the Joint Venture Company shall be handled in
accordance with the Stipulations of the Finance and Accounting System of the
Joint Ventures Using Chinese and Foreign Investment formulated by the Ministry
of Finance of the People's Republic of China. The senior financial officer shall
be responsible for the preparation of the finance and accounting systems of the
Joint Venture Company. The guidelines of the finance and accounting systems will
be submitted to the appropriate tax authorities.
Article 39: Fiscal Year
The fiscal year of the Joint Venture Company for accounting and tax purposes
shall coincide with the calendar year, i.e. from January I to December 31 on the
Gregorian calendar, except for the first fiscal year which will commence on the
day the business license is issued and end on December 31 of the same year.
Article 40: Account Books
The Joint Venture Company shall maintain and keep at its legal address all books
and records required by law or necessary, useful or appropriate for the business
and affairs of the Joint Venture Company.
All minutes, account books, statistic statements and reports of the Joint
Venture Company shall be written in Chinese and English.
Article 41: Accounts Keeping Unit and Banking
The Joint Venture Company adopts Renminbi as the standard currency for keeping
accounts The conversion of Renminbi into other currency or from other currency
into Renminbi shall be in accordance with the exchange rate of the converting
day published by the Bank of China.
11
The Joint Venture Company shall open an account in Renminbi and an other account
in foreign currency.
Article 42: Auditor
The auditors of Joint Venture Company shall be a firm of auditors of
international expertise as the Par-ties shall appoint from time to time. The
Auditors shall, at the end of the Fiscal Year of the Joint Venture Company and
at such other times as they may be reasonably requested by any of the Party,
make an audit of the books and records of Joint Venture Company and for such
purposes they shall have access to all books and records of the Joint Venture
Company.
Article 43: Accounting System
The Joint Venture Company shall adopt the internationally used accrual basis and
debit credit double entry bookkeeping as its accounting system.
Article 44: Content of Financial Account Books
Following items shall be covered in the financial accounts books of the Joint
Venture Company
44.1 The amount of overall cash receipts and expense of the Joint
Venture Company;
44.2 All material purchasing and selling of the Joint Venture
Company;
44.3 The registered capital of the Joint Venture Company;
44.4 The time of payment and of increase in the registered capital
of the Joint Venture Company as well as any assignment or transfer of the
participation or other investment of any Party in the Joint Venture Company.
Article 45: Approval of Statements
The Joint Venture Company shall prepare statement of assets and liabilities, and
losses and profits for each fiscal year, and shall submit same to the Board of
directors for the approval after they shall have been examined and signed by the
auditor and the president.
The books of account shall be closed promptly after the end of each Fiscal Year
of the Joint Venture Company. The Joint Venture Company shall deliver to all of
the Parties the following financial reports prepared in accordance with the
procedure set forth below:
45.1 Annual. Within eighty (80) days after the end of each fiscal year of the
Joint Venture Company, an annual report in respect of such fiscal year
containing:
12
(a) audited financial statement as at the end of, and for, such fiscal year
(prepared in accordance with international generally accepted accounting
principles (International GAAP adopted in China consistently applied with
comparative financial statements as at the end of, and for, the immediately
preceding fiscal year) containing a balance sheet; a statement of profit and
loss; a statement of changes in financial position; and a statement of change in
capital;
(b) a report of the Auditors on such financial statements stating that such
financial statements have been prepared in accordance with international
generally accepted accounting principles (International GAAP) adopted in China
consistently applied;
(c) a report on allocations and distributions (whether directly or indirectly)
to the Parties;
(d) such other information as is required to be provided to the Parties or, in
the opinion of the president (general manager), is material to the business of
the Joint Venture Company;
(e) such financial and other information as may be reasonably requested by a
Party; and
(f) information concerning credits and charges to the capital and current
accounts allocated to the Parties and such other information as may be necessary
to enable a Party to file income tax returns with respect to such Party's income
or loss in respect of such fiscal year.
Article 46: Right to Inspect
Each Party shall have the right to inspect the Joint Venture Company's books and
records at any reasonable time upon advance written request to the president.
Each Party also has the right to invite an auditor to undertake annual financial
check and examination at such Party's expense. The Joint Venture Company shall
cooperate with such auditor and provide him with the appropriate books and
records.
Article 47: Depreciation
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 Laws of the People's Republic of China
Concerning Joint Ventures with Chinese and Foreign Investments and
internationally generally accepted accounting principles and the accounting
principles applicable to the telecommunication industry.
Article 48: Matters Concerning Foreign Exchange
All 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 stipulation of the Joint Venture
Contract signed by the Parties on_______________________________________,1997.
13
CHAPTER 7: DISTRIBUTION OF PROFIT
Article 49: Reserve Funds
The Joint Venture Company shall withdraw from profits, after payment of taxes,
monies which win be held as reserve funds, expansion funds and bonuses and
welfare funds for staff and workers in accordance with the Rules for the
Accounting system of the People's Republic of China Concerning Joint Ventures
with Chinese and Foreign Investments. The proportion of allocation of monies
into each such reserve fund shall be decided by the Board of directors taking
into account the then current business situation and financial condition of the
Joint Venture Company.
Article 50: Distribution Percentage
After paying the taxes in accordance with law and withdrawing the various
reserve funds as provided in article 49 hereof, the remaining profits will be
distributed to Party A and Party B in accordance with the following percentages:
(a) Until such date as Party B's total investment and interest of the external
financing in the Joint Venture Company has been fully recovered by Party B (the
"Recoupment Date"), the distribution of profits shall be in accordance with the
following percentages:
Party Distribution Percentage
PARTY A 20%
PARTY B 80%
(b) After the Recoupment Date, all distribution of profits shall be made as
follows:
Name of the Party Distribution Percentage
PARTY A 49%
PARTY B 51%
Unless otherwise unanimously agreed to by the Parties, the profit shall be
distributed in cash (in Renminbi). Such distribution shall be converted into
foreign currency.
Article 51: Time of Distribution
The Distribution of Profits prior to the Recoupment Date shall be made as and
when profits are legally available for distribution, as determined by the Joint
Venture Company's accountant.
The Joint Venture Company may distribute profits quarterly or annually according
to the current business situation.
14
Article 52: Previous Year and Current Year
The Joint Venture Company shall not distribute profits unless the losses, if
any, of previous fiscal years have been made up. Remaining profit from previous
years can be distributed together with that of the current year.
CHAPTER 8: STAFF AND WORKERS
Article 53: Recruitment
The recruitment, dismissal and resignation of the staff and workers of the Joint
Venture Company and their salary, welfare benefits, labour discipline and other
matters shall be handled according to the Regulation of the People's Republic of
China on Labour Management in Joint Venture Using Chinese and Foreign Investment
and its implementation rules.
Article 54: Local Labour
The employment of the required staff and workers by the Joint Venture Company
will be registered with the local labour department. The Joint Venture Company
may organize a open recruitment through interview and test. The Joint Venture
Company should report to the local labour department on the chosen employees and
to get its consent. All employees of the Joint Venture Company shall sign
employment contracts with the company. The employment contracts shall specify
the benefits of the employees. The contracts must be filed with the local labour
department.
Article 55: Disciplinary Actions
The Joint Venture Company has the right to take disciplinary actions, record a
demerit and reduce salary against those staff and workers who violate the rules
and regulation of the Joint Venture Company or Labour disciplines. Those serious
violations may be dismissed. The dismissal of workers shall be filed with the
local labour and personnel department.
Article 56: Salary Treatment of the Staff
The salary treatment of the staff and workers shall be set by the Board of
directors according to the specific situation of the Joint Venture Company, with
reference to pertaining stipulations of China, and shall be specified in detail
in the labour contract.
Article 57: Welfare Funds
The Joint Venture Company shall establish the rule and regulations concerning
the welfare funds, bonuses, labour protection and labour insurance, etc., to
ensure that the staff and workers go in for production and work under normal
conditions.
15
CHAPTER 9: TRADE UNION ORGANIZATION
Article 58: Right to Establish Trade Union
The staff and workers of the Joint Venture Company 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.
Article 59: Tasks of the Trade Union
The tasks of the trade union are: to protect the democratic fights and material
interests of the staff and workers pursuant to the law; to assist the Joint
Venture Company to arrange and make rational use of welfare funds and bonuses;
to organize political, professional, scientific and technical studies, carry out
literary, art and sports activities; and to educate staff and workers to observe
labour discipline and strive to fulfill the economic tasks of the Joint Venture
Company.
Article 60: Trade Union in the Mediation of Disputes
The trade union shall take part in the mediation of disputes arising between the
staff and workers and Joint Venture Company.
CHAPTER 10: DURATION, TERMINATION AND LIQUIDATION
Article 61: Duration
The duration of the Joint Venture Company shall be Twenty (20) years with a
period of extension to be agreed by the Parties pursuant to Article 62,
beginning from the date on which the business license of the Joint Venture
Company is issued.
Article 62: Extension of Duration
An application for the extension of duration shall, proposed by one Party and
unanimously approved by the Board of directors, be submitted to the original
examination and approval authority six months prior to the expiry date of the
original term of the Joint Venture Contract. Only upon the approval may the
duration be extended, and the Joint Venture Company shall go through
registration formalities for the alteration at the original registration office.
Article 63: Termination before the Expiration
The Joint Venture Company may be terminated before its expiration upon the
happening of any of the following occurrences:
16
63.1 If a Party shall be in breach of any of its material obligations hereunder
causing the Joint Venture Company not to be able to operate continuously, and
such breach shall continue for a period of thirty (30) days from the receipt of
a written notice of breach from the other Party;
63.2 If a Party passes a resolution that it be wound up or liquidated, or a
meeting is convened for the purposes of passing any such resolution, or an order
is made for the winding-up or liquidation of such Party;
63.3 If a receiver or receiver-manager is appointed in respect to the whole or a
substantial part of the affairs or assets of any Party or if a Party is adjudged
bankrupt or insolvent, or files a proposal in bankruptcy;
63.4 If the Joint Venture Company is unable to attain its business objectives or
suffers significant losses during any fiscal year for a reason other than the
happening of an event of force majeure;
63.5 If the Joint Venture Company suffers significant losses during any fiscal
year for a reason of an event of force majeure. Force majeure shall refer to
events such as earthquake, typhoon, flood, fire, riots, war, civil commotions,
strikes, and other unforeseen events or circumstances beyond reasonable control
of a Party and causing the Party not to be able to exercise the responsibilities
specified in this Article;
63.6 If there has been a material change in the applicable laws, regulations or
policies of the pertinent governmental authorities that, in the reasonable
opinion of Party B, would adversely affect the business objectives of the Joint
Venture Company;
63.7 If the Joint Venture Company becomes bankruptcy;
63.8 If the Parties agree unanimously that the termination of the Joint Venture
Contract is in the best interests of the Parties.
In any such event and at the initiative of the Party entitled to terminate as
above provided, the Board of Directors shall resolve at a meeting duly held for
such purpose to terminate the Joint Venture Contract, and such decision shall be
submitted to the examination and approval authority for approval.
Article 64: Liquidation
Upon expiration or termination of the Joint Venture Company before its term
ends, the Board of directors shall proceed to liquidate the Joint Venture
Company in the following manner:
64.1 the Board of Directors shall set up a liquidation committee of four (4)
members. The members of such committee will be selected from among the members
of the Board and each of Party A and Party B.
64.2 the proceeds of liquidation of the Joint Venture Company's assets shall be
utilized in the following order of priority: 17
(a) firstly, to the repayment of all debts and liabilities of the Joint Venture
Company and the expenses of liquidation and to the setting up of any reserve
that the Board of Directors, upon the recommendation of the liquidation
committee, considers reasonably necessary for any contingent or unforeseen
liabilities or obligations of the joint venture.
(b) secondly, to the Parties for the payment of any profits in accordance to
their participation;
(c) thirdly, any remaining assets shall be distributed to the Parties in
accordance to their participation.
During the process of liquidation, the liquidation committee shall represent the
company to sue and be sued.
Article 65: Representation of Liquidation Committee
During the process of liquidation, the liquidation committee shall represent the
Joint Venture Company in any suit.
Article 66: Liquidation Expenses
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 Company.
Article 67: Remaining Property
Assets of the Joint Venture Company may be distributed in kind on the basis of
the then appraised fair market value of such assets, if agreed to by all the
Parties. For purposes of making such distribution only, the unrealized profit or
loss on any such asset (based on its fair market value) shall be first allocated
among the Parties and the distribution of the asset shall be treated as a
distribution of cash equal to the fair market value of such asset. In the event
that Party B is unable to repatriate the assets distributed to it in kind, then
Party A shall agree to purchase the assets to be otherwise distributed to Party
B at their fair market value as determined by an independent evaluator
acceptable to the Parties.
Article 68: Liquidation Report
On completion of the liquidation, the Joint Venture Company shall submit a
liquidation report to the original examination and approval authority, go
through the formalities for nullifying its registration office and hand in its
business license, at the same time a it announces its liquidation to the public.
18
Article 69: Account Books after Liquidation
After winding up of the Joint Venture Company, its account books shall be left
in the care of the Chinese participant.
Article 70: Inspection of Accounts after Liquidation
In the event of liquidation, during the liquidation process or after the
liquidation, each Party shall have the right to inspect the Joint Venture
Company's books and records at any reasonable time upon advanced written request
to the party which keeps the books and records.
CHAPTER 11: RULES AND REGULATIONS
Article 71: Rules and Regulations
The following are the rules and regulations formulated by the Board of directors
of the Joint Venture Company:
71.1 Management regulation, including the power and functions of
the management staff,
71.2 Rules for the staff and workers;
71.3 System of labour and salary;
71.4 System of work attendance records, promotion and awards and
penalty for the staff and workers;
71.5 Detail rules of staff and worker's welfare;
71.6 Financial system;
71.7 Liquidation procedures upon the dissolution of the Joint
Venture Company;
71.8 Other necessary rules and regulations.
CHAPTER 12: SUPPLEMENTARY ARTICLES
Article 72: Amendment to the Articles of Association
The amendment to the Articles of Association shall unanimously be agreed and
decided by the Parties and the Board of directors and submitted to the original
examination and approval authority for approval.
19
Article 73: Both languages
The Articles of Association are written in both the Chinese and English
language, both languages are equally authentic and both Chinese and English
versions shall have the same legal effect.
Article 74: Effect of Articles of Association
The Articles of Association shall come into effect upon the approval by the
ministry of Foreign Economic relations and trade of the People's Republic of
China (or its entrusted examination and approval authority). The same applies in
the event of amendments.
Article 75: Conflict with Joint Venture Contract
In the event that there is a conflict or inconsistency between any provision of
those Articles of Association and the Joint Venture Contract signed by the
Parties on _____________________1997, the Joint Venture Contract shall prevail.
Article 76: Integration
Article 17 of the Joint Venture Contract signed by the both Parties
on_______________________1997 is applicable to this Articles of Association.
Article 77: Notice
Any notice, consent, authorization, direction or other instrument required or
permitted to be given hereunder ("Notice") shall be in writing and shall be
delivered either by personal delivery, by certified mail or by telecopier,
return receipt requested, and addressed as follows:
(a) ▇▇▇ ▇▇▇ TECHNOLOGY DEVELOPMENT LTD.
Suite 210, Building B. No. I I
We Gen Lin Rd., West District
Beijing, People's Republic of China
Attention: President
Telecopier:(▇▇▇▇) ▇▇▇-▇▇▇▇
(b) INFORNET INVESTMENT LIMITED
14th Floor ▇▇▇▇▇▇▇▇▇ House
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attention: President
Telecopier:(▇▇▇) ▇▇▇▇-▇▇▇▇
20
COPY TO:
▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any Notice shall be deemed to have been effectively given and received, if sent
by telecopier, on the next business day following receipt of such transmission
(confirmation of receipt by confirmed facsimile transmission being deemed
receipt of communication sent by telecopy) or, if delivered, to have been given
and received on the date of such delivery. Any Party may change its address for
service by written Notice given as aforesaid.
IN WITNESS WHEREOF, the Parties have duly executed this Articles of Association
in the City of Beijing, China, as of this 25th day of____________1997.
XIN HAI TECHNOLOGY DEVELOPMENT LTD.
Seal
Per: ____________________________________________
INFORNET INVESTMENT LIMITED
Seal
Per:_____________________________________________
21