THE JOINT VENTURE CONTRACT
(AVIC GROUP INTERNATIONAL, INC.,
HEBEI UNITED TELECOMMUNICATIONS
DEVELOPMENT CO. AND BEIJING
CATCH COMMUNICATION GROUP CO.)
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CHAPTER 1: PRINCIPLE
Hebei United Telecommunications Equipment Company is a domestic Joint Venture
Company formed by Hebei United Telecommunications Development Company and
Beijing CATCH Communication Group Co. Its address is ▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The total registered capital is RMB 5 million, in
which Hebei United Development Company invests RMB 0.75 million (15%) and
Beijing CATCH invests RMB 4.25 million (85%).
AVIC Group International, Inc., ("Party A"), Hebei United Telecommunications
Development Company ("Party B" and Beijing CATCH Communication Group, Co.
("Party C") wants to jointly set up a Sino-foreign Joint Venture Company.
Therefore, subject to the principle of fair profit sharing and cooperation for
development, and pursuant to the Law of PRC on Sino-Foreign Joint Venture
("Joint Venture Law") and the Implementation Regulation of the PRC on
Sino-Foreign Joint Ventures ("JV Implementation Regulation") and other relevant
Chinese regulations and laws, the above three parties agree to jointly set up a
Sino-Foreign Joint Venture Company in Shijiazhuang, Hebei Province. The
contract has been signed on _________, 1996 in Shijiazhuang.
CHAPTER 2: JOINT VENTURE PARTIES
1. THE JOINT VENTURE PARTIES
1.1 Party A:
Name: AVIC Group International, Inc.
Organization: A public company incorporated in the
State of Colorado of United States
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇. ▇. ▇.
Legal Representative: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Position: Chairman, Chief Executive Officer and
President
Nationality: American
Party B:
Name: Hebei United Telecommunications
Development Co. Ltd.
Organization: A limited liability corporation
established in People's Republic of
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China in accordance with the Chinese Laws
Address: ▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
The People's Republic of China
Legal Representative: ▇▇ ▇▇▇▇▇▇
Position: Chairman
Nationality: Chinese
Party C:
Name: Beijing CATCH Communication Group Co.
Organization: A corporation owned by the people
established in People's Republic of
China in accordance with the Chinese Laws
Address: ▇▇. ▇ ▇▇ ▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
The People's Republic of China
Legal Representative: ▇▇ ▇▇▇▇
Position: Chairman
Nationality: Chinese
2. LEGAL ABILITY
2.1 Party A, B and C guarantee the following:
(1). Party A is legally formed in New York, U. S. A. Party B is
legally established in Hebei Province, the People's Republic of
China. Party C is legally established in Beijing, the People's
Republic of China
(2). Party A, B and C have the complete right to negotiate and
fulfill the responsibilities and obligations set out in this
Contract.
(3). The signatories of Party A, B and C have the right appointed by
both parties to execute this contract.
CHAPTER 3: ESTABLISHMENT OF THE JOINT VENTURE COMPANY
3. ESTABLISHMENT OF THE JOINT VENTURE COMPANY
3.1 Party A, B and C agree to form and incorporate a Sino-Foreign
Joint Venture Company with limited liability ("The Joint Venture
Company") in the PRC
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on the terms and conditions approved by certain authorities. The
Joint Venture Company will be established under the Joint Venture Law
and the Joint Venture Implementation Regulations. All important
decisions and documents related to the Joint Venture business shall be
approved by the Joint Venture Company first before submitting to the
relevant authority for approval.
4. THE JOINT VENTURE COMPANY
4.1 The Name of the Joint Venture Company
The Chinese name of the Joint Venture Company shall be
____________________________. The English name of the Joint Venture
Company shall be Hebei United Telecommunications Engineering Co.
Limited. The legal location of the Joint Venture Company is ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇.
The Joint Venture Company must be registered at Industry and
Commerce Administration and Management Bureau.
4.2 None Joint Venture party can use its parent company and other
related company's trademark and logo without a written agreement
from other Joint Venture parties.
5. LAW
5.1 The Joint Venture Company's activities in China must fully
comply with all the relevant laws, regulations in China and the
provisions set out in this contract.
6. ORGANIZATION:
6.1 The Joint Venture Company will be a limited liability company for
the purpose of the Company Law of the PRC. All parties shall
undertake the liability of the Joint Venture Company subject
to its investment amount. All parties agree that the Joint Venture
Company's investment will be a full risk investment negotiated as
part of a joint business exercise designed to share both risks,
rewards and loses based on its share ownership ratio in the
registered capital between the partners.
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CHAPTER 4: BUSINESS OBJECTIVE AND SCOPE
7. BUSINESS OBJECTIVE OF THE JOINT VENTURE COMPANY
7.1 All parties agree that the business objectives of the Joint Venture
Company are to participate in the construction and installation of
Hebei GSM digital telecommunications project and other post and
telecommunications projects; to strengthen in business cooperation
and technology development and exchange; to apply advanced
telecommunications technology and efficient management skills; to
improve technical standard of telecommunications industry and
relating services; and to reach both economic and social goals that
are satisfactory to all parties.
8. THE SCOPE OF THE JOINT VENTURE COMPANY
8.1 The Joint Venture Company agrees to provide the following services:
construction and installation of the telecommunications
projects; upgrade technology of existing systems and other related
network projects; providing technical consultation, maintenance,
services and other related businesses.
CHAPTER 5. TOTAL INVESTMENT CAPITAL, REGISTERED CAPITAL, AND SHARE RATIO OF THE
JOINT VENTURE PARTNERS
9. TOTAL INVESTMENT CAPITAL AND REGISTERED CAPITAL
9.1 The total investment capital of the Joint Venture Company will be
US$ 6 million.
9.2 The registered capital of the Joint Venture Company will be US$3
million.
10. SHARE RATIO
Party A, B and C will provide US$ 3 million as the Joint Venture Company's
registered capital, in which:
10.1 Party A will contribute US$1.824 million (60.8%). Party B will
invest US$0.90 million (30%)and Party C will invest US$0.276 million
(9.2%).
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The capital payment responsibility of each Joint Venture party will
be equal to their capital contribution.
11. THE AMOUNT AND TERM OF THE CAPITAL PAYMENT
11.1 All parties shall infuse capital in accordance with the following
method after obtaining a Joint Venture Company Business License
("Business License") from the state industry and commerce
administration authority:
Party A: US$930,000.00 shall be wired to the Joint Venture
account within 30 days after getting the business
license. The rest (US$894,000.00) shall be wired to
the account within 3-6 months after getting the
business license.
Party B: The total amount shall be wired to the account within
30 days after getting the business license.
Party C: The total amount shall be wired to the account within
30 days after getting the business license.
11.2 The investment amount shall be wired to the Joint Venture bank
account according to clause 42 listed in this contract.
12. CERTIFICATE OF INVESTMENT
12.1 The investment payment from Party A, B and C shall be certified by a
registered public accountant. After receiving a satisfactory
certificate recording such investment, the Joint Venture Company
will issue the Certificate of Investment, including the amount and
share ownership of the registered capital, signed by the Chairman
and Vice Chairman of the Joint Venture Company to Party A, B and C.
13. THE USAGE OF THE INVESTMENT
13.1 None of Party A, Party B, Party C or any other parties have the
right to use the investment capital infused to the bank account
according to Clause 11.2 without the Board's decision of how to use
such investment. However, the funds which
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will be used during the Joint Venture preparation period shall be
paid by the Joint Venture Company subject to the approvals from all
Parties.
14. TRANSFER OF CAPITAL
14.1 Except for Clause 14.3, Party A, B or C may, as either Party wishes
transfer, in whole or part, its shares of the Joint Venture
Company to other Party with prior written notice to the other
Parties and approval from the relevant authorities. Party A, B or C
shall make the decision within 90 days of receiving the written
notice.
14.2 If either Party A, B or C wishes to transfer its whole or partial
shares, such Party shall first offer the share to the other
Party of the Joint Venture Company for purchase. The other Party
shall submit a written notice to declare its decision of purchasing
those shares within 90 days. If the other Party does not submit its
decision within 120 days, or this Party has first offered partial
share to the other Party of the Joint Venture Company, any
unsubscribed shares may then be offered to a third Party at a price
not less than the price offered to the other Joint Venture Party.
14.3 All Parties may transfer its whole or partial shareholding to
their parent companies or their subsidiaries during the term of
this Contract in accordance with Clause 47. However, the relevant
government approvals must be submitted to execute such transfer.
14.4 After the Party transferring its whole or partial shares to a
third Party, such third Party shall abide by the terms of this
Contract and perform and discharge all of its obligations of this
Contract and share its rights as well. In addition, certain
provisions in this contract shall be revised pursuant to the change
in the shareholding ratio.
14.5 The transfer will not be effective if one of the Parties
violates any provisions set out in this contract.
15. THE INCREASE OF THE REGISTERED CAPITAL
15.1 The registered capital (Clause 9) may be increased
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from time to time subject to approval of the Board of Directors of
the Joint Venture Company. The contribution from all parties to
increase the registered capital pursuant to Clause 10 of this
Contract shall be pro rata in accordance with the share ratio of
each Party at the time of such capital increase. If one Party
declines to increase the registered capital, the other Party then
has the priority to increase the whole or a portion of the amount of
the increase in registered capital which is rejected by the other
Party. The obligations of each Party shall also be adjusted
pursuant to the new share ownership ratio. In addition, Party A, B
and C have the right to ask the other Party to increase the
registered capital upon receipt of a written agreement between the
Joint Venture parties and subject to obtaining the relevant PRC
governmental approvals.
16. MORTGAGE:
16.1 Party A, B and C shall not use their portion of the Joint
Venture Company's investment capital as any kind of mortgage or
guarantee.
CHAPTER 6: RESPONSIBILITIES OF ALL PARTIES
17. RESPONSIBILITIES OF PARTY A, B AND C:
17.1 The parties shall contribute, where necessary in accordance with
the Joint Venture Company's Business Plan and upon such terms and
conditions as may be agreed with the Joint Venture Company, to the
general business development of the Joint Venture Company by
fulfilling the following responsibilities:
A. Party B and C shall:
(1). Provide the registered capital based on the share ratio
pursuant to Clause 11 of this Contract.
(2). Assist the Joint Venture Company in its fund raising, and
to obtain investment capital at favorable terms and
conditions.
(3). Provide necessary assistance to exchange
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foreign currency to RMB or to exchange RMB to foreign
currency.
(4). Obtain all necessary approvals and permits from the
competent authorities of the PRC, including,
establishment and registration of the Joint Venture
Company, and all other approvals or permits necessary for
the proper conduct of the Joint Venture Company's
business and endeavor to obtain preferential treatment
for the Joint Venture Company.
(5). Assist in the construction of public utilities, such as
water, electricity and gas, the connection of the
telephone and fax lines and provide the material
transportation.
(6). Purchase and rent the required equipment, machinery, raw
material, cars, communication equipment and others which
shall be bought in China in accordance with the agreement
by both parties.
(7). Assist the Joint Venture Company with customs clearance
for import and export of equipment and products and obtain
entry permits, visas, work permits, travel permits and all
other approvals for expatriate personnel of the Joint
Venture Company and obtain suitable accommodation for
expatriate personnel.
(8). Provide necessary assistance for recruiting executives,
technicians, workers and other employees in China. In
addition, it shall help its employees to settle their
accommodation if necessary.
(9). Provide the information of China market to the Joint Venture
Company and develop a domestic market for the Joint Venture
Company.
(10).Provide documents and information relating to the
Chinese economy, investment and marketing and also
relevant documents relating to Chinese policy, law,
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regulation, tax system, accounting system and others.
(11). Obtain all necessary approvals, registration and
licenses from the competent Chinese authorities
required for the establishment of the Joint Venture
Company.
(12). Obtain the approvals for the Joint Venture Company to
use land from the Land Administration Authority.
(13). Organize the construction and design of the Joint
Venture Company building.
(14). Handle all other matters appointed by the Joint Venture
Company and agreed to by Party A.
B. Party A shall:
(1). Provide the registered capital based on share ratio
according to Clause 11 set up in this Contract.
(2). Assist the fund raising for the telecommunications
projects confirmed and approved by all parties of the Joint
Venture Company outside China and guarantee that the money
be transferred to the Joint Venture account pursuant to the
Business Plan. The interest rate of such fund shall not be
too high and loan provided by Party A to the Joint Venture
Company shall not be at usurious rates.
(3). Obtain all necessary approvals and permits from the
competent authorities in the United States required for the
establishment of the Joint Venture Company.
(4). Purchase and rent the necessary equipment, machines,
materials, cars, communication and office equipment which
shall be purchased abroad by Party A and agreed by all
Parties.
(5). Assist the Joint Venture Company with
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customs clearance for import/export of equipment and
products (including all necessary export permits), obtain
entry permits, visas, work permits, travel permits and all
other approvals for expatriate personnel of the Joint
Venture Company and obtain suitable accommodation for
expatriate personnel.
(6). Provide necessary assistance for recruiting foreign
executives, technicians and other employees in a method
agreed by the President.
(7). Provide the documents and information relating to the
American economy, investment and marketing, and also the
relevant documents about American policy, law, rules, tax
system, accounting system, etc.
(8). Provide advanced technology to the Joint Venture Company
and appoint its technicians to support the Joint Venture
Company's projects.
(9). Provide technical training for the Joint Venture Company's
employees in accordance with the technical training
contract signed by the Joint Venture Company and
Party A.
(10).Handle all other matters appointed by the Joint Venture
Company and agreed by Party A.
CHAPTER 7: TECHNICAL ASSISTANCE
18. TECHNICAL SERVICE
18.1 When it is necessary, the Joint Venture Company has the right to
enter into a Technology Service Agreement with Party A or any other
Parties based on the agreement of all parties.
19. CONFIDENTIALITY
19.1 It is agreed that all information generated
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pursuant to the terms of this Contract is confidential and neither
Party shall, except with the written consent of the other Party,
disclose or release such information to any third Party.
19.2 Party A, B and C shall ask their executives and all other employees
to understand the importance of confidentiality for the Company.
All employees shall sign the Confidentiality Agreement when they
join the Joint Venture Company.
CHAPTER 8: PURCHASE OF EQUIPMENT AND MATERIAL
20. PURCHASE OF RAW MATERIALS, EQUIPMENT AND MACHINES
20.1 The Joint Venture Company shall determine if the necessary
equipment, materials, fuel, transportation equipment and office
equipment shall be purchased in China or abroad. However, if the
quality, quantity, performance, delivery, and after-sale service
of a foreign product are comparable to a Chinese product, the Joint
Venture shall first consider purchasing the product in China. If
Party A has to purchase equipment abroad for the Joint Venture
Company, Party B and C shall be involved in such purchasing if
necessary.
CHAPTER 9: BOARD OF DIRECTORS
21. OBLIGATIONS OF BOARD OF DIRECTORS
21.1 The Board of Directors of the Joint Venture Company is the
authoritative organ of the Joint Venture Company and shall be fully
responsible for the entire business of the Joint Venture Company.
22. ESTABLISHMENT OF THE BOARD OF DIRECTORS
22.1 The Joint Venture Company's Board of Directors will be established
on the day a Business License is granted to the Joint Venture
Company.
23. COMPOSITION OF THE BOARD AND THE TERM OF EACH DIRECTOR
23.1 The Board of Directors shall consist initially of Seven (7) members,
one (1) Chairman and one (1) Vice Chairman. Four (4) Directors will
be appointed by Party A, and three (3) Directors will be appointed by
Party B. The Chairman of the Board
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shall be appointed by Party B. The Vice Chairman shall be appointed
by Party A. The term of the Chairman, Vice Chairman and directors
shall be three years and these positions may be re-appointed
consecutively if necessary. The term of the Chairman and Vice
Chairman shall begin from the date a Business License is granted to
the Joint Venture Company to the closing date of the Board meeting
which will discuss the financial statement for the 4th fiscal year
of the Joint Venture Company. During the term of the directors, if
such matters as death, resignation, retirement or inability to
fulfill the job occurs, the Party who appoints such director shall
select a replacement as soon as possible. The replacement director
shall serve out the term of his predecessor.
23.2 If one Party wants to change the director, a written notice shall be
submitted to the BOD meeting within 30 days.
23.3 The Chairman, Vice Chairman and directors will receive no salary from
the Joint Venture Company. If any of the Chairman, Vice Chairman or
directors hold the titles of the President, Executive Vice President
or Vice President of the Joint Venture Company, they shall receive
compensation from the Joint Venture Company for fulfilling the duties
of these executive positions, but no extra money shall be paid to
them for their directorships.
24. BOARD:
24.1 The Board shall be responsible for formulating and implementing the
general policy of the Joint Venture Company. If any decision of the
Board of Directors is in compliance with applicable Chinese laws,
then no third Party shall be involved in such decision.
24.2 The Chairman is the legal representative of the Joint Venture
Company. If the Chairman can not fulfill his obligations for some
reason, the Vice Chairman or another director shall temporarily
assume his responsibilities.
25. BOARD MEETING
25.1 Board meetings shall be held at the Joint Venture
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Company's offices at least once a year and shall be hosted by the
Chairman. Meetings of the Board of Directors may be held at other
locations subject to the agreement of Chairman and the Vice Chairman.
If more than two directors submit a written notice to the Chairman
and suggest the Chairman to issue a written notice for a temporary
Board meeting 30 days before a scheduled Board meeting, the Chairman
must agree to hold such temporary Board meeting. However, any
proposals within 30 days before the Board meeting will be valid upon
the agreement of all directors.
25.2 A written notice with details of agenda and papers supporting the
items on the agenda shall be given to all directors 30 days before
the Board meeting. Upon receipt of the agenda and prior to the
meeting, the directors may consult with each other on any items on
the agenda.
25.3 If 2/3 of the directors attend the Board meeting, such Board meeting
shall be considered as legally effective. If one director can not
be in the meeting for some reason, he can appoint his representative
to attend the meeting with a written notice, and his representative
shall have the same right to vote the decisions of the Board
meeting. If a decision is made at a Board meeting with insufficient
director attendance, such decision shall have no legal force.
25.4 All costs associated with attending Board meetings by director,
including travel and accommodations and all costs incurred by
Directors in attending to the business of the Joint Venture Company
shall be reimbursed by the Joint Venture Company.
25.5 All minutes of the meetings of the Board of Directors shall be
prepared and recorded in the English and Chinese languages and shall
be signed by the directors and its representatives who attend the
Board meeting. The original copy shall be kept in the Joint Venture
Company until the Company dismisses. The copy of the minutes shall
be sent to Party A and Party B. If there is any difference between
the two versions, the Chinese version shall be taken as the ruling
version.
26. RESOLUTIONS OF THE BOARD OF DIRECTORS
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26.1 Except for clause 26.2 and 26.3, a Board of Directors resolution will
become effective upon receiving approval from 1/2 of the directors
present at any meeting.
26.2 The following matters require approval from at least 2/3 of the
directors in attendance at any meeting to become effective:
(1). Approval of the long-term, medium-term and annual business
plan, equipment investment, product sales and employment
arrangements, etc.
(2). Decisions on the changes of annual budget plan, payment of any
expenditure in excess of the amount approved in the budget and
payment of liabilities. However, if the budget amount is less
than RMB1 million and not over 20% of the budget plan, or if
the budget amount is over RMB1 million and not over RMB500,000,
President and Vice President can make the decision without any
restriction but must report to the Board afterwards.
(3). Approval of the annual business plan, financial report and
annual budget plan.
(4). The declaration or payment of any profits or dividend
distribution to the shareholders.
(5). Approval to raise investment capital.
(6). The approval of the annual or semi-annual financial report.
(7). Approval of significant changes in the Joint Venture Company's
management organizational structure.
(8). Any significant changes on the Board's regulation, accounting
system, operation expenses, cash control regulation or any
other Joint Venture internal regulations.
(9). Any changes in Employment Contracts and the Employee's
Handbook.
(10). Any decisions regarding the salary,
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welfare and reward of the President, the Vice President, Joint
Venture Company Executives and other employees.
(11). The appointment or dismissal of the Joint Venture Company's
President, Executive Vice President, Vice President or CFO.
(12). Any capital transfer from other business entities.
(13). Manage and transfer of the Joint Venture Company's partial or
total capital. Set up the Joint Venture Company's mortgage
right and guarantee right.
(14). Establishment or dissolution of any branch company, subsidiary
or agency of the Joint Venture Company.
(15). Approval of any investment, loan or guarantee of $100,000 or
greater.
26.3 The following matters require unanimous approval from the Board of
Directors present at any meeting:
(1). Any change in the Joint Venture Company's Articles of
Incorporation.
(2). Any increase or decrease in the registered capital.
(3). Any merger with other business entities.
(4). Dissolution of the Joint Venture Company except as set forth in
Clause 48 and 51 of this Joint Venture Contract.
(5). Setting up the asset mortgage right of the Joint Venture
Company.
27. WRITTEN RESOLUTIONS OF THE BOARD OF DIRECTORS
27.1 Written resolutions of the Board of Directors shall become effective
if approved by all directors. The directors have the right to
approve, object or abstain from any Board resolution.
CHAPTER 10. MANAGEMENT ADMINISTRATION ORGANIZATION
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28. PRESIDENT AND VICE PRESIDENT
28.1 A management administration organization shall be set up under the
supervision of the Board, and such organization shall handle the
day-to-day operation of the Joint Venture Company.
28.2 The management shall consist one President, and one Vice
Presidents. The Board of Directors shall decide the appointment of
President and Vice President of the Joint Venture Company.
28.3 The term of the President and Vice President shall be three years.
Reappointment of each position will be available. If the management
changes during the term of the position, the replacement shall serve
out the term of his predecessor
29. THE OBLIGATION OF PRESIDENT OF THE JOINT VENTURE COMPANY
29.1 In addition to the day-to-day management of the Joint Venture
Company, President shall fulfill the following responsibilities:
(1). To make long-term and annual Business Plan of equipment
investment, product sales and employee arrangement, and submit
such plans to the Board. President shall execute the Board's
resolution on all above-mentioned items.
(2). President shall be responsible for the presentation of the
Business Plan, Budget Plan and financial review for each
succeeding financial year for approval and adoption by the
Board meeting.
(3). To make capital collection, distribution and investment plan
and submit such plan to the Board meeting.
(4). To make quarterly and yearly financial report and submit it to
the relevant authority upon receiving the approval from Board
meeting. If it is urgent, the Board approval can be received
after submitting to the authority.
(5). To set up management structure and submit to the Board meeting
for approval.
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(6). To appoint senior executive positions in the Joint Venture
Company.
(7). To set up the regulations of the Board meeting, accounting
system, expense budget, cash management and all other internal
regulations of the Joint Venture Company, and submit to the
Board meeting for approval.
(8). To make Employment Contract and other regulations regarding
the employment of the Joint Venture Company and submit to the
Board meeting for approval.
(9). To formulate the salary of the Company's executives and other
employees, including welfare and reward, and submit to the
Board meeting for approval.
(10).To appoint and dismiss the employees except for President, Vice
President and CFO.
(11).To set up the plans to establish and dismiss the Joint Venture
Company's branch company, subsidiary and other agency.
(12).To purchase of the property within certain expense limit
approved by the Board meeting.
(13).To sign the contract with a third Party within his job
responsibilities.
(14).The other responsibilities and obligations appointed by the
Board meeting.
29.2 Vice President can be concurrently the head of each different
department except for its daily job to assist President of the
Joint Venture Company. If President can not fulfill his obligations
for some reason, Vice president shall take his responsibilities
temporarily.
29.3 President and Executive Vice President shall work closely on the
important decisions of the Joint Venture Company. If a disagreement
occurs, President has the right to select the final decision.
30. THE CONCURRENT POSITION OF THE COMPANY EXECUTIVES
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30.1 President, Vice President and other senior executives shall not take
the other executive positions in any other business companies
concurrently. In addition, they shall not be involved in any other
activities with any other companies or organizations which have the
similar business.
31. BRIBES, CORRUPTION AND OTHER INAPPROPRIATE ACTIVITIES
31.1 The Board has the right to dismiss President, Vice President and CFO
at any time if their inappropriate activities have been found. For
the Joint Venture Company employees, President has the right to
dismiss them if their inappropriate activities have been found.
CHAPTER 11. LABOR MANAGEMENT
32. THE MANAGEMENT OF EMPLOYEE AND WORKERS
32.1 The rules concerning employment, recruitment, dismissal of employees
of the Joint Venture Company and their salary, welfare, benefits,
labor insurance, labor protection, labor discipline and other
matters shall be specified by the Board of Directors in accordance
with the "Regulations of the PRC Labor Management in Foreign
Investment Enterprises" and its implementation rules.
33. EMPLOYMENT CONTRACT
33.1 The Joint Venture Company shall sign the contract with the Joint
Venture Union and individual employees. The Employment Contract
shall include the salary, welfare, benefit, labor insurance, labor
protection, labor discipline, dismissal, reward and job description,
etc. The copies of such contract shall be submitted to local labor
administration department for file.
33.2 The salary of the Joint Venture employees will be under the
principle of "same position same payment". Under such principle,
the salary and welfare of the foreign employees and the employees
from U. S. appointed by Party A shall be decided based on the
Sino-foreign Joint Venture foreign employee's basic standard.
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CHAPTER 12. UNION
34. THE SET UP OF THE JOINT VENTURE COMPANY UNION
34.1 The Joint Venture employees have the right to set up a Union and
hold various activities under the "PRC Union Law".
34.2 The Union's leader shall represent the interest of the Joint Venture
employees. Its responsibilities include: to protect Joint Venture
employees' material benefits and their democratic rights; to assist
the Joint Venture to set up its welfare fund; to organize various
activities for the Joint Venture employees in the field of politics,
business, science, technology, entertainment, sports, etc.; to train
the employees to obey various employment regulations; and to fulfill
various business responsibilities appointed by the Joint Venture
Company.
35. OBLIGATIONS
35.1 The Union's leader shall represent each individual employee to sign
the Employment Contract with the Joint Venture Company. The Union's
leader shall also participate in the Joint Venture's Board meeting
and bring employees' opinions to the Board.
35.2 To mediate the quarrel between the Joint Venture employees.
36. FEE
36.1 Each employee shall contribute 2% of his/her monthly salary to the
Joint Venture Union. Such fee will be used under the supervision
of relevant Chinese laws and regulations.
CHAPTER 13. TAX, FINANCE AND AUDITING
37. ACCOUNTING AND TAX
37.1 The Joint Venture's accounting activities shall be conducted under
the relevant Chinese laws and regulations. The financial statement
of the Joint Venture Company shall be made in accordance with
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"PRC Foreign Investment Enterprise Accounting System".
37.2 Joint Venture Company shall pay taxes pursuant to the relevant
Chinese regulations. In addition, the Joint Venture employees shall
pay income tax to the State under the "Individual Income Tax Law of
the PRC".
38. CURRENCY
38.1 RMB shall be used as the standard currency for the Joint Venture
Company's daily business and accounting. US dollar will be used to
record the registered capital. The Joint Venture's foreign currency
debt, income and expense shall be recorded pursuant to its actual
currency. The conversion of RMB to foreign currency or from any
foreign currency to RMB shall be conducted based on the exchange
rate on each transaction date issued by China Foreign Currency
Management Bureau.
38.2 The difference of the actual currency amount caused by increase and
decrease of the foreign currency exchange rate shall be recorded in
the Company's annual financial report.
39. FINANCING MODEL
39.1 The Joint Venture's quarterly and annual asset liability statement
and other annual financial report shall be prepared in Chinese and
submit to Party A, B, C and other relevant authorities for their
approval. The financing model can also be translated into Chinese
and submit to Party A if required.
40. ACCOUNTING AND AUDITING
40.1 The Company shall allow an independent reputable accounting firm
(registered in China) nominated by the Joint Venture Company, access
to relevant sections of such accounts and records for the sole
purpose of verifying the Joint Venture Company's fee and payment
arrangements. The accounting report shall submit to the Board
meeting for approval.
40.2 Party A, B and C have the right to invite an
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accountant to check the Company's accounting book at any time at
its own expenses. The Joint Venture Company and its employee shall
provide the necessary assistance and convenience for that accountant.
41. FISCAL YEAR
41.1 The fiscal year of the Joint Venture Company shall be from January 1
to December 31. However, the first fiscal year shall start from the
date of obtaining the Business License to Dec, 31. All accounting
reports shall be written in Chinese.
42. BANK ACCOUNT
42.1 After getting the Business License, the Joint Venture Company shall
open its foreign currency bank account and RMB bank account at Bank
of China or other assigned banks under the relevant regulations and
laws of PRC. In addition, the Joint Venture Company can also open
its foreign currency bank account or RMB bank account abroad,
including Hong Kong and Macao subject to the approval from China
Foreign Currency Management Bureau.
43. FOREIGN CURRENCY LAW
43.1 All Joint Venture Company's activities regarding the foreign
currency business shall comply with and carry out the relevant laws
and regulations issued by Chinese government.
44. THE USAGE OF THE FOREIGN CURRENCY
44.1 The Joint Venture's foreign currency shall be used in the following
activities:
(1). To purchase the import materials for the Joint Venture Company.
(2). To pay the capital and interest of a foreign currency loan.
(3). To pay the expenses of technical service from abroad.
(4). To pay the possible distributable profit.
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45. WIRE TRANSFER OF FOREIGN CURRENCY
45.1 The Joint Venture Company can wire the foreign currency to an abroad
bank account only under the following conditions: to wire the
Company profit to Party A; to pay the expenses of technical service
from abroad; to pay the interest and capital of a foreign currency
loan; to get the approval from China Foreign Currency Management
Bureau.
CHAPTER 14. PROFIT DISTRIBUTION
46. PROFIT DISTRIBUTION
46.1 The parties agree that all of the net after tax profits and setting
up saving fund, employee reward fund or other company business fund
(hereinafter called "distributable profit"), funds established in
accordance with the laws of the PRC shall be distributed to the
parties pursuant to the Board resolution. The Joint Venture
Company's profit shall be handled in accordance with the following
provisions:
(1). The Joint Venture Company shall not increase the capital to
make up the deficit because of the lose in the first half year.
(2). Before making up the deficit for the first half year, both
parties can not distribute the Joint Venture Company's profit.
(3). Subject to the Board decision, the Joint Venture shall
distribute the distributable profit once a year within 90 days
after the end of the fiscal year. Such profit will be shared
by Party A, B and C in the following ratio:
Party A: 60.8%
Party B: 30%
Party C: 9.2%
(4). The Joint Venture Company shall assist Party A to exchange the
profit from RMB to the foreign currency. If the Joint Venture
Company is unable to exchange the whole or partial amount of
the profit to foreign currency for some reasons, this amount of
profit can be kept in Joint Venture Company until such exchange
is
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available. The exchange rate from RMB to foreign currency
shall be based on each day's interest rate issued by PRC
Foreign Currency Administration Bureau.
CHAPTER 15. TERM
47. TERM
47.1 The Parties agree that the Joint Venture Company shall continue for
a term of 20 years from the date of registration of the Joint
Venture Company.
47.2 The Board meeting shall decide the extension or the change of the
term of the Joint Venture Company and shall submit its decision to
the relevant Chinese authority for approval one year before the
termination of the Joint Venture Contract.
CHAPTER 16. TERMINATION
48. TERMINATION
48.1 If one of the following events occurs, Party A, B and C shall have
the right to terminate the Joint Venture Contract within 60 days and
shall submit to the Board for approval. Meanwhile, an application
to terminate the contract shall also be provided to the relevant
authority:
(1). The Joint Venture Company has suffered the serious loses
continuously for five years, and still no important and
efficient decision has been made to save such lose after 60
days receiving the financial report, or after mutual
negotiation, both parties fail to find an efficient way to
continue the operation.
(2). If Party A, B or C violates the regulations under clause 17 and
19 of this Contract.
(3). If an event of Force Majeure occurs under clause 55 of this
Contract.
(4). To merge the Joint Venture Company with another business
entities, and therefore the Joint Venture Company does not
exist any more.
(5). If one Party goes bankruptcy.
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(6). If all parties agree that the Joint Venture Company can not
achieve its original goal due to some other reasons.
(7). All parties agree to terminate this Contract.
(8). If the Joint Venture Company has to change its contract,
regulations, the technical service contract and other related
important documents unreasonably because of the order from the
government, and such change will obviously prevent the
development of the Joint Venture Company.
48.2 If one of the above-mentioned events occurs, and all parties can not
get a mutual agreement, the Party who agrees to continue the
business shall purchase the registered capital from the other Party
who wants to terminate the Joint Venture Contract.
48.3 The Board of Directors shall take every possible measures including
to suspend the business if the Joint Venture has not got the
approval from the relevant authority within 90 days under the
condition of Clause 48.1.
49. CLEARING COMMITTEE
49.1 The Board of Directors shall form a Clearing Committee to handle the
termination of the Joint Venture Company business, and all such
activities shall be conducted under relevant Chinese laws and
regulations. The members of the Clearing Committee shall be
selected from the directors. If the director can not take such
responsibilities for some reasons, the Joint Venture Company shall
appoint its accountant or lawyer (registered in China) to be
involved in such activities. The Clearing Committee shall be
responsible to provide a whole set of Joint Venture Company's capital
and liability financial report, and to sell the Joint Venture Company
based on the fair market price. The Clearing Committee shall also
try their best to sell the Joint Venture Company at its highest price
in China or abroad in foreign currency if possible.
50. DISMISSAL AND CLEARANCE
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50.1 Pursuant to the Clause 48 of this contract, the clearance of the
Joint Venture Company shall be conducted under the following
methods: after selling the Joint Venture Company and handling the
other Joint Venture capital matters, the Joint Venture shall pay
(a) the clearance fee, (b) employee's salary, insurance and other
welfare, (c) taxes and (d) the Joint Venture debts. The rest
of the Joint Venture capital shall be distributed to all parties in
accordance with the share ratio under Clause 10 of this contract.
50.2 Under the conditions set out in Clause 50.1, the capital distributed
to Party A shall be in cash, and shall first consider to pay back in
foreign currency. The exchange rate of such amount of foreign
currency shall be based on the rate issued by China Foreign Currency
Management Bureau at the same day.
CHAPTER 17. VIOLATION OF THE JOINT VENTURE CONTRACT
51. DISMISSAL OF THE CONTRACT
51.1 One Party has the right to apply for the termination of the Joint
Venture Contract from the relevant state authorities if the Joint
Venture Company can not continue its business because of violation
of this Contract caused by Party A, B or C, and such violation has
not been corrected within 30 days after a written notice has been
issued from other Party.
52. VIOLATION AND LOSE
52.1 If one Party does not fulfill its obligations set out in this
Contract, or if one Party violates some of the provisions of this
Contract, and such violation causes the loses to the other Party,
the other Party then has the right to ask for a compensation.
52.2 Party A, B or C shall not be responsible for the expected profit,
indirect lose and deriving lose caused by one of the other Parties.
52.3 Subject to Clause 11 of this Contract, if Party
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A, B or C has not infused the capital into the Joint Venture Company,
such Party shall pay the violation fee to the Joint Venture Company
based on a 15% annual interest rate.
52.4 The violation fee mentioned in Clause 52.3 is not related to the
registered capital and share ownership ratio of the Company.
CHAPTER 18. OTHER CONTRACTS
53. OTHER CONTRACTS
53.1 Subject to the requirement of the Joint Venture business, Party A, B
and C may sign the following contracts with the Joint Venture
Company from the date of obtaining Business License.
(1). The Technical Service Agreement under Clause 18.
(2). The Technical Training Agreement for the Joint Venture
Employees.
CHAPTER 19. OTHERS
54. CHANGE OF THE JOINT VENTURE CONTRACT
54.1 The change of the Joint Venture contract shall be effective upon
receipt of the signatures from all parties, and shall submit such
changes to the relevant authorities for approval.
54.2 If there is any difference between the Joint Venture Contract and
the Joint Venture's other regulations, this Contract shall be the
only standard.
55. FORCE MAJEURE
55.1 The obligations of a Party shall be suspended if at any time its
performance is prevented by any cause beyond its reasonably control
including acts of war, riots, strikes, labor disputes, fires,
floods, storms, earthquake or other natural disasters and any other
event which that party could not foresee at the time of executing
this Contract and its occurrence and consequences can not be avoided
and can not be overcome. The Party
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whose obligations are suspended by reason of any such event shall
promptly submit the notarized certificate or the first class new
report stating the nature of the suspension, the reasons and the
expected duration.
55.2 All parties shall negotiate and decide the termination and extension
of the Joint Venture contract or other related matters caused by the
event of Force Majeure.
56. INSURANCE
56.1 The Joint Venture Company shall select a Chinese Insurance Company
to obtain appropriate insurance cover. The type, price and time of
the insurance shall be decided in accordance with the regulations of
the insurance company in China. If some type of insurance can not
be covered by the insurance company in China, the Joint Venture
Company may buy it abroad subject to the Board's decision.
57. CHANGE OF THE LAW
57.1 If the performance of the Joint Venture Company has been prevented
by the change of the governing law or government in China and the
United States or other causes beyond its reasonable control, Party
A, B and C have the right to change or terminate this Contract.
58. GOVERNING LAW
This Contract shall be governed by and interpreted in accordance with the
Laws of PRC.
59. ARBITRATION
59.1 Any dispute and lose compensation arising out of this Contract shall
to the fullest extent possible be settled amicably by negotiation
and discussion between the Parties.
59.2 Any such dispute not settled by amicable agreement shall be
submitted to an Arbitration Organization for arbitration. When
Party B and C initiates an action, Party A will appoint Beijing
China International Economic Trade Committee for arbitration, and
when Party B initiates an action,
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Party A will appoint the arbitration association selected by Party A
for arbitration. The International Business Arbitration Association
shall conduct the arbitration under each party's regulation of
arbitration. There shall be three arbitrators of whom one each shall
be appointed by each Party and the third arbitrator by each Party's
Commission. The third arbitrator can neither be Chinese nor American.
Any decision taken by the arbitrators will be final, binding and
conclusive.
59.3 All Parties shall pay their cost of arbitration separately except
for the special requirement written in the final arbitration
decision. The cost paid to the arbitration organization shall be
shared by all parties.
59.4 During the process of arbitration, the Joint Venture Company's daily
business shall be operated continuously, except for the dispute part
currently under the arbitration.
60. THE LANGUAGE OF THE JOINT VENTURE CONTRACT
60.1 The Joint Venture Contract shall have eight copies. Each Party
holds one copy. Two copies shall be sent to the relevant authority.
The rest of the copies shall be kept in the Joint Venture's file.
60.2 The Joint Venture Contract is written in both Chinese and English,
and shall take the Chinese version as the standard.
61. EFFECTIVE DATE OF THE CONTRACT
This Joint Venture Contract will be effective from the date of getting the
approval from Foreign Economic and Trade Ministry of PRC.
62. NOTICE
62.1 Any notices or communications to be given under this Contract shall
be sent by either telegram, telex or facsimile transmission. Any
notices or communications relating to the important business on
Joint Venture partner's obligations, profits and responsibilities
shall be sent by registered post. The addresses for service of each
Party
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shall be those addresses previously notified to the other Party.
The notice shall be effective from the receipt date of such post.
62.2 Any notices or communications mentioned in Clause 62.1 shall be
written in Chinese or English.
63. OTHER COSTS
63.1 Party A, B and C shall be responsible to its own cost relating to
the negotiation, preparation and signature of this Contract,
including legal service fee.
63.2 After signing the Joint Venture Contract, any cost relating to the
establishment of the Joint Venture Company can be put into the Joint
Venture Company's preparation budget.
64. THE RELATIONSHIP OF THE ALL PARTIES
64.1 Party A, B and C shall fulfill its own obligations and
responsibilities set out in this Contract, and have no right to
represent the other Party to fulfill its obligations.
This Contract has been signed on ______________, 1996 in __________, PRC, by
the representatives from Party A, B and C.
Party A: AVIC Group International, Inc.
By: /s/ ▇▇▇▇ Jun
Name: ▇▇▇▇ ▇▇▇
Title: Executive Vice President - AVIC China
Date: December 18, 1996
Party B: Hebei United Telecommunications Development Co.
By: /s/ ▇▇ ▇▇▇▇▇▇
Name: ▇▇ ▇▇▇▇▇▇
Title: Chairman
Date: September 20, 1996
Party C: Beijing CATCH Communication Group Co.
By: /s/ Ju Feng
Name: Ju Feng
Title: President
Date: September 20, 1996
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