Joint Venture Contract
Between
Shandong Hengtong Chemical Industrial Company
Ltd.
And
Asian Alliance
Ventures
Incorporated
_____ _____, 1999
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Table of Contents
1 GENERAL PROVISIONS AND PARTIES TO THE JOINT VENTURE.....................1
2 STANDING, AUTHORISATIONS AND LEGAL REPRESENTATIVES OF THE PARTIES.......1
3 ESTABLISHMENT OF THE JOINT VENTURE COMPANY..............................2
4 PURPOSE, SCOPE AND SCALE OF PRODUCTION OF THE JV CO.....................3
5 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL.......................3
6 TRANSFER AND INCREASE OF REGISTERED CAPITAL.............................4
7 RESPONSIBILITIES OF EACH PARTY TO JV CO.................................4
8 THE BOARD OF DIRECTORS..................................................6
9 BUSINESS MANAGEMENT ORGANISATION........................................8
10 PURCHASE OF EQUIPMENT AND RAW MATERIALS...............................9
11 TECHNOLOGY AND TRADEMARK..............................................9
12 BANK ACCOUNT AND FOREIGN EXCHANGE ADMINISTRATION......................9
13 TAXES, FINANCE AND AUDIT.............................................10
14 DISTRIBUTION OF PROFITS AND CASH SURPLUSES...........................11
15 CONFIDENTIALITY AND NON-COMPETITION..................................11
16 FORCE MAJEURE........................................................12
17 DURATION OF THE JOINT VENTURE........................................12
18 DISSOLUTION AND LIQUIDATION OF THE JOINT VENTURE.....................12
19 INSURANCE............................................................13
20 LIABILITY FOR BREACH OF THE CONTRACT.................................13
21 APPLICABLE LAW.......................................................13
22 SETTLEMENT OF DISPUTES AND ARBITRATION...............................14
23 AMENDMENT AND ALTERATION OF THIS CONTRACT............................14
24 SUPPLEMENTARY ARTICLES...............................................14
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1 GENERAL PROVISIONS AND PARTIES TO THE JOINT VENTURE Shandong Hengtong Chemical
Industrial Company Ltd. from China and Asian Alliance Ventures Incorporated from
the United States of America agree to, jointly invest in Tancheng County,
Shandong Province of the People's Republic of China to establish Shandong
Hengtong Development Chemical Co., Ltd. (hereinafter referred to as the "JV
Co.") in accordance with the "Chinese-Foreign Co-operative Joint Venture Law of
the Peoples' Republic of China", its implementation regulations and other
related laws and regulations, on the principle of mutual benefits and through
friendly consultations, and hereby conclude the joint venture contract
(hereinafter referred to as "Contract") as follows:
The Parties to this Joint Venture Contract (the "Parties") are:
Party A
Name : Shandong Hengtong Chemical Company Ltd.
Registered Country : China
Legal Address : ▇▇. ▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Postal Code : 276100
Legal representative : ▇▇▇▇, ▇▇▇▇▇▇
Position : Chairman and General Manager
Nationality : China
Telephone : ▇▇ ▇▇▇ ▇▇▇-▇▇▇▇
Facsimile : ▇▇ ▇▇▇ ▇▇▇-▇▇▇▇
Registered with the Shandong Provincial Administrative Bureau for Industry and
Commerce with its business license No. 26717136-X-1.
Party B
Name : Asian Alliance Ventures Incorporated
Registered Country : United States of America
Legal Address : ▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇. ▇▇▇▇▇,
▇▇▇
Legal Representative : ▇▇▇▇▇▇ ▇▇▇▇▇▇
Position : President, Director
Nationality : Canadian
Telephone : ▇ ▇▇▇-▇▇▇-▇▇▇▇
Facsimile : ▇ ▇▇▇-▇▇▇-▇▇▇▇
Incorporated in Nevada, USA
2 STANDING, AUTHORISATIONS AND LEGAL REPRESENTATIVES OF THE PARTIES
2.1 Each Party hereto represents and warrants that it is a valid legal
person duly established under the laws of China or the United
States of America respectively, and represents that it enters into
this Contract on its own account and has all necessary corporate
powers and authority to enter into this Contract and to perform
its obligations or undertake the liabilities hereunder.
2.2 Each Party to the JV Co., shall have delivered to the other Party
certified authenticated copies or notarized and chopped (under
seal) copies of the certificates
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of incorporation or business license, powers of attorney and
copies of other documents to confirm the good standing and duly
authority of each Party and each legal representative to enter
into and be bound by the terms and conditions of this Contract.
2.3 Party A represents and warrants that it has the authority to
contribute or lease the following assets (collectively referred to
as "Assets") to the JV Co. :
2.3.1 Equipment, facilities and material listed in Exhibit C
attached hereto ("Equipment, Facilities and Materials");
2.3.2 Land use right as shown in Exhibit B and factory and its
facilities as shown in Exhibit E will be leased to the JV
Co.("Land, Factory and Facilities")
2.3.3 The above Land, Factory and Facilities shall be ready and
able to provide sufficient water, power, steam, drainage
etc, to enabled the JV Co. to reach its projected
production scale as prescribed in Article 4 of this
Contract.
2.4 Party A represents and warrants that there is no mortgage or
encumbrance exists or created over the Equipment, Facilities and
Materials it contributed to and the Land, Factory and Facilities
it lease to the JV Co. and there are no existing, pending or
threatened litigation, disputes or court, arbitration or
administrative proceedings, against Party A and its Assets. To the
best knowledge of Party A, there is no governmental investigation
against Party A and its Assets for violation of any laws or
regulations.
2.5 Party A hereby further represents and warrants that there are no
past or existing petitions, suits or claims against it due to
environmental pollution. Should it be found following the
establishment of the JV Co., that there is any environmental
pollution as a result of the past operations of Party A, Party A
shall indemnify the JV Co. against any losses suffered therefrom
by it.
3 ESTABLISHMENT OF THE JOINT VENTURE COMPANY
3.1 In accordance with the "Chinese-Foreign Co-operative Joint Venture
Law of the People's Republic of China", its implementation
regulations and other relevant Chinese laws and regulations, the
Parties agree to set up Shandong Hengtong Development Chemical
Co., Ltd. in Shandong, China.
Name and address of the JV Co.
Chinese Name: [CHINESE CHARACTERS]
English Name: Shandong Hengtong Development Chemical Co., Ltd.
Legal Address: Tancheng County, Shandong, China
Postal Code: 276100
The JV Co. has the status of a Chinese legal person and is subject to the
jurisdiction of, and protected by the laws of the Peoples Republic of
China ("PRC"). All activities of the JV Co. shall be governed by the
relevant laws, rules and regulations of the PRC, and enjoy the relevant
favorable policies thereof.
The JV Co. is a limited liability company. The liability of each Party to
the JV Co. is limited to the registered capital subscribed by it. Each
Party shall share profits, risks and losses of the JV Co. in proportion
to their respective contributions to the registered capital of the JV Co.
Creditors of the JV Co. (including taxation and other authorities) shall
have recourse only to the assets of the JV Co.
The date of issuance of the Business License of the JV Co. shall be the
date of establishment of the JV Co. Upon establishment of the JV Co., the
Parties shall through the Board of
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Directors procure that the Articles of Association agreed by the Parties
and attached hereto as Exhibit A will be adopted by the JV Co. as its
Articles of Association.
4 PURPOSE, SCOPE AND SCALE OF PRODUCTION OF THE JV CO.
4.1 The purpose of the JV Co. is to use the internationally and
domestically advanced technology to produce and sell high quality
products to enable the Parties to obtain satisfactory economical
results.
4.2 The business scope of the JV Co. shall be to develop, produce and
distribute chemical fertilizer, power and steam and other related
products.
4.3 The initial production scale of the JV Co. is anticipated to be
annual output of Urea 200,000 tonne, plus 2X12 thousand KW thermal
power. The Board of Directors shall study and decide from time to
time the scale of production for each type of products according
to any changes in market conditions.
5 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
5.1 The total amount of Investment of the JV Co. is RMB248,410,000,
equivalent to US$29,928,916 at 1US$=8.3RMB (the "Total
Investment"). The registered capital of the JV Co. is
RMB212,480,000, equivalent to US$25,600,000 at 1US$=8.3RMB (the
"Registered Capital").
5.2 The proportion of Registered Capital to be contributed by each
Party shall be as follows:
5.2.1 The equity to be contributed by Party A shall be worth
RMB104,580,000, constitutes 49% of the Registered Capital
of the JV Co. The form of the investment shall be
Equipment, Facilities and Materials;
5.2.2 The equity to be contributed by Party B shall be
US$13,000,000, equivalent to RMB107,900,000 at 1US$=8.3RMB,
constitutes 51% of the Registered Capital of the JV Co.
5.2.3 The difference between the Total Investment of the JV Co.
and Registered Capital of the JV Co. shall be raised by
assuming current liabilities of RMB35,930,000 of Party A.
5.3 The investment of each Party shall be contributed as follows:
5.3.1 Party A shall contribute part of the Equipment, Facilities
and Materials worth RMB 104,580,000 to the JV Co. within
three months from the date when the Business License of the
JV Co. is issued;
5.3.2 Party B shall contribute US$13,000,000 in cash; 6.5 Million
within three months and 6.5 Million within eight months
from the date when the Business License of the JV Co. is
issued.
5.4 The JV Co. shall lease the Land, Factory and Facilities and the
rest of the Equipment, Facilities and Materials within three
months from the date the Business License of the JV Co. is issued.
5.5 After each Registered Capital contribution is made by each Party,
the JV Co. shall engage a certified public accountants firm of
International standing registered in China to verify the
Registered Capital contribution and to issue a Certificate of
Verification. The JV Co. shall issue an Investment Certificate to
each Party in accordance with the Certificate of Verification. The
Investment Certificates shall be the evidence of the Parties'
Registered Capital contributions to the JV Co.
5.6 Should one Party fail to make its Registered Capital contributions
in full within the time prescribed under this Contract, it shall
be deemed to have breached this Contract. Upon the request of the
non-breaching Party, the defaulting Party shall consent to the
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termination of this Contract without prejudice to any rights or
obligations of all Parties accrued prior to such termination. The
non-breaching Party shall have the right to seek compensation from
the breaching Party for damages under Article 20 hereof. However,
no compensation will be due or payable for any actions or damages
incurred prior to the date when the Business Licence of the JV Co.
is issued and any damages are specifically restricted to those
resulting from the operation and activities of the JV Co.
5.7 Should either Party fail to make its equity contributions to the
JV Co. within three months after the issuing of business license,
the other Party shall have the right but not the obligation to
terminate this Contract or extend the date.
6 TRANSFER AND INCREASE OF REGISTERED CAPITAL
6.1 If any Party intends to transfer all or part of its interests in
the JV Co., such transfer shall be subject to Article 6 of this
Contract and to the approval of the original approval authority.
6.2 If any Party intends to transfer all or part of its equity
interests in the JV Co., it shall give the other Party a 30 days'
prior written notice. The other Party shall have pre-emptive right
to purchase such equity interests. None of the Parties shall
transfer its equity interests to any third party at more favorable
terms than it offered to the other Party of the JV Co.
6.3 The Parties hereby agree that, when more funds are raised by one
Party from time to time by agreement of each Party, and the other
Party cannot raise enough funds to keep its original equity
proportion, such other Party shall, upon the former Party's
request, be obligated to transfer its comparable equity interests
in the JV Co. to the former Party or the former Party's associated
companies, parent companies, or subsidiaries. The price of such
transfer shall be determined by an accounting firm hired by the JV
Co. which is registered in China with international standing. In
the case of Party A, in addition to the above conditions, such
accounting firm shall be recognized by the relevant administrative
department for state-owned assets.
6.4 Subject to the above, the JV Co. may, in accordance with this
Contract and subject to the approval of the Board of Directors and
the original examination and approval authority, increase, reduce,
transfer or otherwise change its Registered Capital based on the
needs of its operation.
6.5 Notwithstanding the provisions hereunder or elsewhere, a Party
may, subject to the approval of the original examination and
approval authority, transfer all of its interests in the JV Co. to
its wholly-owned subsidiaries or parent companies or the
wholly-owned subsidiaries of its parent companies. The transfer
shall be notified to the other Party in writing 30 days in advance
and the other Party shall give its consent to such transfer
PROVIDED THAT the proportion of Registered Capital of the original
Parties before such transfer remains the same and the
transferee(s) agree in writing to be bound by the terms of this
Contract. Or in case of any reorganization of one Party,
including, but not limited to division, merger, acquisition or
restructure of share holding, the obligations and rights of such
Party shall be borne by the succeeding party after such
reorganization. Any transfer under this Article 6.5 is not subject
to the pre-emptive right under in Article 6.2.
7 RESPONSIBILITIES OF EACH PARTY TO JV CO.
7.1 Party A shall undertake the following responsibilities and duties:
7.1.1 Contribute to the JV Co. Equipment, Facilities and
Materials in accordance with the provisions of Article 5 of
this Contract;
7.1.2 Be responsible for applying to the relevant authorities for
approval of this Contract and the registration of the JV
Co. The JV Co. shall reimburse
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Party A all reasonable expenses and government registration
fees for obtaining the Business License;
7.1.3 Assist the JV Co. in dealing with the following
formalities: (i) importing and obtaining importation
license for all raw materials, machinery and equipment
necessary for the business of the JV Co. and effective
insurance coverage thereof and renewing same in a timely
manner, (ii) informing Party B of related Chinese laws,
regulations, notices and any other information affecting
the operations of the JV Co., (iii) obtaining and providing
to the JV Co. and Party B available information on the
Chinese market necessary to facilitate the JV Co.'s
operations;
7.1.4 Assist the JV Co. in purchasing and handling all procedures
of all necessary equipment, materials, etc. in China when
needed;
7.1.5 Assist the JV Co. in obtaining all necessary utilities and
supplies including without limitation to water,
electricity, communication, etc.;
7.1.6 Recommend to the JV Co. (without obligation on the part of
the JV Co. to employ) persons suitable to undertake
managerial and technical positions, and render all
assistance to the JV Co. in the recruitment of such and
other personnel;
7.1.7 Assist foreign workers and staff and their family members
in obtaining all entry visas, work permits and other
necessary travel documents;
7.1.8 Assist the JV Co. in solving problems arising from time to
time in respect of the business operations of the JV Co.,
and without limitation, in the event that any measure of
legal or administrative force is introduced or taken or any
commercial measure is implemented by any Chinese authority
having detrimental effect either on the JV Co. or any
Party, to liase with the authorities responsible for such
measure and to use its best efforts to remove or limit such
measure or such detrimental effect to the benefit of the JV
Co. or the relevant Party;
7.1.9 Assist the JV Co. in obtaining preferential status and
treatment that it should be entitled to from the Chinese
government;
7.1.10 manage the JV Co. according to the Management Agreement
concluded among Party A, Party B and the JV Co.;
7.1.11 Assist the JV Co. in convening meetings of the Board of
Directors in China, such reasonable expenses to be borne by
the JV Co.; and
7.1.12 Use its best endeavors to assist the JV Co. in any other
matters entrusted to it or reasonably requested by the JV
Co.
7.2 Party B shall undertake the following responsibilities and duties:
7.2.1 Contribute the cash contributions in US Dollars in
accordance with the provisions of Article 5 of this
Contract;
7.2.2 Supervise the financial and management of the JV Co.
according to the Management Agreement concluded among Party
A, Party B and the JV Co.;
7.2.3 Recommend (without obligation on the part of the JV Co. to
employ) managerial and technical personnel to the JV Co.,
and render all assistance to the JV Co. in the recruitment
of such and other personnel;
7.2.4 Assist the JV Co. in convening meetings of the Board of
Directors in America whenever the Board of Directors shall
decide to meet in America,
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such reasonable expenses to be borne by the JV Co.; and
7.2.5 Use its best endeavors to assist the JV Co. in any other
matters entrusted to it or reasonably requested by the JV
Co.
8 THE BOARD OF DIRECTORS
8.1 The date of issuance of Business License of the JV Co. shall be
the date of establishment of the Board of Directors of the JV Co.,
and the Board of Directors shall convene its first meeting as soon
as practicable so that the business of the JV Co. may commence
without delay.
8.2 The appointment of the Directors
8.2.1 The Board of Directors shall comprise of 5 Directors, of
which 2 Directors shall be appointed by Party A and 3
Directors shall be appointed by Party B, PROVIDED ALWAYS
that the ratio representation on the Board of Directors
shall reflect as near as practicable the proportion of each
Party's contributions to the Registered Capital and the
ratio representation on the Board of Directors shall be
adjusted to take effect immediately upon the date of change
in proportion of Registered Capital contributions.
8.2.2 The Chairman of the Board of Directors shall be appointed
by one Party so long as such Party maintains a majority
proportion of the Registered Capital of the JV Co. The
other Party shall appoint a Vice-Chairman. The Chairman and
Vice-Chairmen of the Board of Directors shall have the
right to vote at any Board meeting but shall not have a
second or casting vote.
8.2.3 The term of office of a Director shall be 3 years. However,
the appointing Party shall give a 14 days' prior written
notice to the other Party (except in case of emergency
immediate notice may be given) of its intention to renew,
terminate or replace any of its Directors. In case a
Director is removed or replaced before the expiry of
his/her term of office, his/her successor shall be
appointed as Director for the residue of the term only.
8.3 The authority of the Board of Directors
8.3.1 The Board of Directors shall be the highest power of
authority of the JV Co.
8.3.2 An unanimous approval of the Directors present at the Board
meeting shall be required before any decisions are made
concerning the following issues:
8.3.2.1 Amendment of the Articles of Association of the JV
Co.;
8.3.2.2 Increase, decrease or transfer of the Registered
Capital subject to the provisions of Article 6 of
this Contract;
8.3.2.3 Termination or extension of the duration of the JV
Co.;
8.3.2.4 Amendment to the Authorized Debt level of the JV
Co.;
8.3.2.5 Capital expenditures in excess of RMB 800,000;
8.3.2.6 Joint venture, merger or amalgamation with another
economic entity;
8.3.2.7 Any change in the stated business purpose of the JV
Co. or conducting any business beyond what is set
out in Article 4 of this Contract;
8.3.2.8 Advances or loans to any individual or entity,
other than credit issued in the normal course of
business;
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8.3.2.9 Encumbrances on any JV Co.'s assets;
8.3.2.10 Removal or relocation of any JV Co.'s assets
valued over RMB 800,000; and
8.3.2.11 Changes in legal or audit engagements.
8.3.3 Unless otherwise specified in the other provisions of this
Contract, all other issues shall be resolved at Board
meetings by a simple majority vote of all Directors present
at the Board meeting.
8.4 Board Meeting
8.4.1 The Board of Directors shall hold a Board meeting at least
once a year. The place and time of meeting shall be decided
by the Chairman of the Board of Directors.
8.4.2 At least thirty working days' prior written notice of a
Board meeting shall be given to each Director, and such
notice shall state the time and place of the Board meeting
and shall be accompanied with an agenda of the business to
be transacted at the meeting. Shorter notice may be given
only by written consent of all the Directors.
8.4.3 All Board meetings shall be convened and presided over by
the Chairman. If the Chairman is unable to attend the
meeting, the Chairman shall appoint Vice Chairman or any
other Director to chair and preside over the Board meeting.
The Chairman shall convene an interim Board meeting upon
the request of more than two Directors, at least one of
them shall be appointed by each Party, in the event that
major matters need to be solved.
8.4.4 A Director who is unable to attend a Board meeting may
appoint another Director or any other person as his/her
proxy. The duly executed proxy shall be delivered to the
Chairman at the commencement of the Board meeting.
8.4.5 The quorum for any Board meeting shall be two thirds of the
Directors comprising of at least 1 Director appointed by
each Party. If, within half an hour from the time scheduled
for the holding of the Board meeting, a quorum is not
present, the meeting shall be automatically adjourned till
the 7th day from the original meeting day at the same time
and place. If the postponed 7th date for the adjourned
Board meeting falls on a holiday, then such Board meeting
shall be held on the next working day. Any 2 Directors
present in person or by proxy (at least one of them is
appointed by each Party) shall constitute a quorum for the
adjourned meeting but, under such circumstances, no
business shall be conducted at the adjourned meeting except
those specified in the agenda for the original meeting.
8.4.6 Board meetings may be held in Chinese or English as
determined by the Chairman. Detailed minutes of each Board
meeting shall be recorded in both Chinese and English and
shall be signed by all Directors present at the meeting and
properly filed. A copy of the minutes of the Board meeting
shall be delivered to each Party. Each Party may have an
interpreter present at the Board meetings, the expense of
which shall be paid by the JV Co..
8.4.7 Any action required or permitted to be taken at any Board
meeting may be taken without convening a meeting if a
resolution in writing, setting forth the action to be
taken, is signed by all the Directors of the Board. Any
such
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resolution may consist of several identical documents in
like form each signed by one or more Directors.
8.5 The JV Co. shall not pay any salary to the Chairman, Vice Chairman
and any Director unless he/she holds office as a General Manager,
Chief Financial Officer, Deputy General Manager or other Senior
Manager of the JV Co., and under such circumstances salary shall
be paid only in accordance with his/her contract of employment.
The traveling and lodging expenses of Directors for attending the
Board meeting shall be borne by the JV Co.
9 BUSINESS MANAGEMENT ORGANISATION
9.1 The Board hereby entrusts Party A to manage the JV Co. in
accordance with the Management Agreement concluded among Party A,
Party B and the JV Co. The Management Agreement shall contain but
not limited to the following terms:
9.1.1 the principles and policies of the management of the JV Co.
to be followed by Party A;
9.1.2 the rights and obligations of Party A in managing the JV
Co.;
9.1.3 the rights and obligations of Party B in supervising the
management of the JV Co.;
9.1.4 the appointment, replacement, authorities, duties,
obligations, functions and compensation of the General
Manager, Chief Financial Officer and Deputy General Manager
of the JV Co.
9.1.5 terms and conditions of leasing Land, Factory and
Facilities and offices from Party A;
9.1.6 terms and conditions of supplying power, water, steam, and
other necessary public utility by Party A;
9.1.7 terms and conditions of supplying paid services by Party A;
9.1.8 terms and conditions of supplying raw materials by Party A;
9.1.9 terms and conditions of sale of products of the JV Co.
9.1.10 terms and conditions of other services provided by Party A.
9.2 Party A, Party B or the Board may request to revise the Management
Agreement. If the agreement cannot be reached in revising the
Management Agreement, the Board, by a simply majority vote, may
suspend or terminate the Management Agreement and take over the
management of the JV Co. till the Management Agreement is revised
to its satisfaction (hereinafter referred to as "Board
Management").
9.3 Board Management
9.3.1 Upon the Board taking over the management in accordance
with Article 9.2, the Board shall establish a Management
Committee as soon as practicable to manage the daily
operation of the JV Co.
9.3.2 The Management Committee shall comprise of a General
Manager, one Chief Financial Officer and one Deputy General
Manager. The General Manager shall be appointed by the
Board by the affirmative vote of the majority thereof. Upon
the recommendation of the General Manager, the Board shall
appoint or dismiss the Deputy General Manager and Chief
Financial Officer by the affirmative vote of the majority
thereof. The Deputy General Manager and the Chief Financial
Officer shall be responsible to the General Manager.
9.3.3 The General Manager shall be fully responsible for the
management of the
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JV Co. under the leadership of the Board of Directors. The
General Manager shall be responsible for executing and
carrying out the resolutions of the Board and perform
his/her following duties within the authorization of the
Board:
9.3.3.1 manage the daily operation of the JV Co.;
9.3.3.2 propose budget and operation plan to the Board and
carry out the budget and operation plan approved by
the Board;
9.3.3.3 formulate the operation rules and regulations of
the JV Co.;
9.3.3.4 formulate all rules and regulations and policies on
recruitment, employment, dismissal, and resignation
of employees, wages, salaries, discipline, labor
protection, insurance, welfare, rewards, and other
matters concerning the staff and workers of the JV
Co. in accordance with the "Labor Law of the PRC"
and "Regulations of the PRC on Labor Management in
Foreign Invested Enterprises" and all other
relevant rules and regulations;
9.3.3.5 sign contract on behalf of the JV Co., PROVIDED
THAT the entering into or performance of any
contract, arrangement, obligation, liability,
expenditure or commitment by or for the JV Co.
shall not exceed the amount described by the Board
for any one transaction or exceed an aggregate of
the amounts described by the Board outstanding at
any one time; if the amount exceeds the above
mentioned amount, approval from the Board shall be
obtained; PROVIDED FURTHER THAT the entering into
any contracts between the JV Co. and any of the
Parties, or any entity which is a subsidiary,
affiliate or related entity to a Party, approval
from the Board shall be obtained;
9.3.3.6 other matters entrusted by the Board.
9.3.4 The Deputy General Manager shall assist the General Manager
in his/her work.
9.3.5 The Chief Financial Officer shall be responsible for the
financial matters of the JV Co. under the leadership of the
Board, including the preparation and delivery of monthly
financial reports in a form acceptable to the Board.
10 PURCHASE OF EQUIPMENT AND RAW MATERIALS
10.1 The JV Co. shall, as far as possible, purchase locally produced
equipment and raw materials required for the production facilities
whenever the terms of supply (including price and quality) are
more favorable than that offered by overseas suppliers.
11 TECHNOLOGY AND TRADEMARK
The JV Co. shall use technical know-how, patent and other technology in
accordance with the requirements that Party A has made when contributing them to
the JV Co. The JV Co. shall make royalty payments to Party A for its use of
Party A's technical know-how, patent and other technology, if and when required,
which are not defined as Party A's Assets, necessary for the JV Co.'s business
needs.
12 BANK ACCOUNT AND FOREIGN EXCHANGE ADMINISTRATION
12.1 The JV Co. shall open an account in RMB and an account in foreign
currency with the Bank of China or any other bank registered in
China. All payments made by the JV Co. shall be examined, approved
and signed by designated signatories agreed by both Parties.
12.2 All cheques, promissory notes, drafts, bills of exchange, and
other negotiable
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instruments payable by, and all receipts or discharges for money
paid to the JV Co., shall be executed as follows:
12.2.1 in respect of an amount not more than a certain amount (the
"Described Amount") the payment shall be effected upon the
signature of the General Manager;
12.2.2 in respect of an amount more than the Described Amount, the
payment shall be effected upon the signature of the General
Manager subject to the Board's approval;, and
12.2.3 the aforesaid Described Amount shall be decided by the
Board from time to time based on the operation of the JV
Co.
12.3 All matters concerning foreign exchange shall be settled in
accordance with the regulations of the State Administration of
Foreign Exchange of PRC and in accordance with this Contract.
12.4 The foreign currency of the JV Co. shall be paid in the following
order of priority:
12.4.1 principal and interests payable of foreign currency loan;
12.4.2 payment for equipment, spare parts and materials purchased
from overseas market for the operation of the JV Co.;
12.4.3 salaries payable to the expatriates hired by the JV Co.;
and
12.4.4 after-tax profits distributable to Party B.
13 TAXES, FINANCE AND AUDIT
13.1 The JV Co. shall pay income tax and other taxes and fees in
accordance with relevant laws and regulations of the PRC.
13.2 Employees of the JV Co. shall pay individual income taxes
according to the "Individual Income Tax Law of the People's
Republic of China".
13.3 The JV Co. shall apply for all applicable favorable tax treatment
for itself and its employees.
13.4 The fiscal year of the JV Co. shall be from 1 January to 31
December of every year.
13.5 The JV Co. shall adopt RMB as its accounts keeping currency unit.
All vouchers, receipts, statistics statements and reports, account
books and records shall be written in Chinese, all financial
reports and other financial statements shall be written in both
Chinese and English and submitted to both Parties. Reports of
English versions shall indicate U.S. Dollar amounts converted from
RMB using the exchange rate published by the People's Bank of
China on the last day of the reporting period.
13.6 The JV Co. shall adopt financial and accounting rules in
accordance with relevant regulations and rules on accounting
standards implemented by the Ministry of Finance of the PRC and
generally accepted international accounting principles and
practices in keeping its accounts.
13.7 A profit and loss account statement, a statement of assets and
liabilities and a financial report of the JV Co. shall be prepared
on a monthly, quarterly and yearly basis in both Chinese and
English by the accountants of the JV Co., and submitted to the
Board of Directors and each Party and the relevant government
authority in accordance with the relevant regulations.
13.8 The JV Co. shall within 1 month after each fiscal year complete
the final draft of the annual financial report for the preceding
fiscal year.
13.9 The annual audit of the JV Co. shall be conducted by a certified
public accountants
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firm registered in China and appointed by the Board. The audited
annual report shall be submitted to the Board of Directors for
review before filing with the relevant authorities.
13.10 Each Party shall have the right to invite an auditor to undertake
at its own expense re-audit of the accounts of the JV Co., to
which the JV Co. and the other Party shall give their consents.
When there is any disputes arising from any discrepancies between
the results of the auditing and re-auditing, the temporary Board
meeting shall be called to resolve the difference.
14 DISTRIBUTION OF PROFITS AND CASH SURPLUSES
14.1 The JV Co. shall not distribute profits unless the losses of
previous fiscal years have been made up.
14.2 Before distributing any profits, the JV Co. shall pay all taxes to
which it is liable and make all contributions to the reserve fund,
expansion fund and reward and social welfare fund for staff and
workers as required by law. The General Manager shall decide the
proportion of contribution to each fund as long as such
distribution complies with the law and regulations and does not in
total exceed 20% of after tax earnings annually.
14.3 Profits of the JV Co. shall be distributed annually. Party A shall
share 49%, and Party B shall share 51% of the distributable
profit. The details of the profit distribution plan including the
date of distribution shall be determined by two-thirds of the
Board of Directors within 3 months after the end of each fiscal
year.
14.4 Cash surpluses declared and approved by the Board will be
distributed to retire debt and, subject to the approval of the
approval authority, reduce registered capital as and when approved
by the Board.
15 Confidentiality and non-competition
15.1 Each of the Parties undertakes irrevocable obligation to keep the
confidence of all the secret information of the JV Co. obtained
through its performance of the JV Contract and Articles of
Association.
15.2 Starting from the effective date of this Contract, Party A shall
not:
15.2.1 directly or indirectly engage itself in the business in
competition with the business of the JV Co.;
15.2.2 provide or assist a third party to provide services
including but not limited to consulting, marketing,
services, maintenance and repair to the past, current or
future customers of, or entities that maintain business
relationship with the JV Co.
15.2.3 employ or try to employ employees of the JV CO.
15.3 Article 15.1 shall not apply to:
15.3.1 each Party's Directors, the General Manager(s) and any
other employees and its bankers, accountants, auditors,
attorneys, suppliers, consultants and potential JV Co.'s
partners who need to have access to such information or
data to make their decisions and to perform their
responsibilities, PROVIDED THAT the disclosing Party shall
take appropriate measures to assure that such entities and
persons shall keep the disclosed information and data
private and confidential;
15.3.2 information that a Party is required to disclose under
applicable laws to any government or governmental agency or
to its shareholders or to the public or to any applicable
Stock Exchange; and
15.3.3 each Party's affiliated enterprises, PROVIDED THAT such
affiliated
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enterprises to which such disclosure is made agree in
writing to maintain confidentiality in accordance with the
terms of Article1 5.1.
16 FORCE MAJEURE
16.1 In case of any force majeure event including earthquakes,
typhoons, flood, fire, war, strike or any other events that is
unforeseeable and the occurrence and consequence of which is
inevitable and which affects the performance of the relevant term
of this Contract, the Party affected shall immediately notify the
other Party in writing and shall within twenty (20) days provide
full written particulars of the force majeure event and
certification of the cause of the failure or delay of performance
of the relevant term of this Contract. Such certification shall be
issued by a notary public of the place where such force majeure
event occurred. The Parties to this Contract shall then determine
whether to terminate this Contract in accordance with Article 18
or to exempt the Party affected from, or postpone the performance
of, the relevant term of this Contract.
17 DURATION OF THE JOINT VENTURE
17.1 The term of the JV Co. is thirty years from the date on which the
Business License is issued.
17.2 The term may be extended upon the agreement of all Parties. Any
application for extension of the term shall be submitted to the
original examination and approval authority at least 6 months
prior to its expiration. The JV Co. shall continue its operation
for the extended term upon approval of the said authority.
18 DISSOLUTION AND LIQUIDATION OF THE JOINT VENTURE
18.1 Upon the occurrence of any of the following events, subject to the
approval of the relevant authorities, the Board of Directors may
unanimously decide to dissolve the JV Co. and this Contract shall
be terminated. However, any dissolution of the JV Co. or
termination of this Contract shall not affect any rights,
obligations or claims of any Party prior to such termination or
dissolution.
18.1.1 the JV Co. incurs substantial losses and is unable to carry
on its business;
18.1.2 any Party or the JV Co. breaches any of its obligations
under this Contract, the Articles of Association of the JV
Co. or the Management Agreement, and such breach adversely
affects the interests of any Party or renders it impossible
for the JV Co. to continue its operation;
18.1.3 the JV Co. incurs substantial losses arising from the force
majeure event as provided in Article 16 and is unable to
carry on its business;
18.1.4 there is any change in Chinese or any foreign laws or
regulations or in interpretation thereof that has a
material adverse effect on the JV Co. or any Party;
18.1.5 there is a confiscation or requisition of all or a material
part of the assets or revenues of the JV Co. or Registered
Capital contributed by any Party;
18.1.6 any Party goes into or files for bankruptcy, liquidation,
receivership or is unable to meet its debts as they fall
due;
18.1.7 Any deadlock in decisions by the Parties or the Board of
Directors pursuant to this Contract; or
18.1.8 occurrence of any other event or events upon which all
Parties of the JV Co. agree will result in the termination
of the term of the JV Co.
18.2 Upon the expiry or termination of this Contract for any reason
whatsoever (the "Termination Date"), the Management Contract shall
likewise be deemed to expire or terminate on the Termination Date
and the Board shall by two-thirds of the Board of Directors
determine the procedure for and principles of liquidation and
shall, subject to
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the approval of the original examination and approval authority,
appoint a Liquidation Committee to conduct the sale or liquidation
of the JV Co.
18.3 The Liquidation Committee shall re-evaluate all assets of the JV
Co., including, but not limited to the Equipment, Facilities and
Materials.
18.4 All expenses of liquidation (including remuneration of the members
of the Liquidation Committee) shall be paid in priority before any
distribution of assets. The Liquidation Committee shall pay and
discharge all debts and liabilities of the JV Co., including any
debts to any Party before distribution of assets and may, if
necessary, convert any asset into money for purposes of such
payment PROVIDED ALWAYS that Liquidation Committee shall as far as
possible ensure that the assets is sold at the best possible
market price.
18.5 The remaining assets of the JV Co. after liquidation shall be
distributed to the Parties in accordance with the proportion of
the Registered Capital contribution of each Party. When
distributing the assets to the Parties, the Liquidation Committee
shall take into account the following:
18.5.1 Priority shall be given to Party A for the allocation of
fixed assets;
18.5.2 Priority shall be given to Party B for the allocation of
foreign currency.
18.6 On completion of liquidation, the JV Co. shall submit a
liquidation report to the original examination and approval
authority and comply with all formalities de-registering the JV
Co. (including the surrender of the Business License) at the local
Administration for Industry and Commerce whereupon announcement
shall be published in newspapers.
18.7 Upon the winding-up of the JV Co., all original books of accounts
and records shall be kept with Party A and copies of the same
shall be provided to Party B.
19 INSURANCE
19.1 The JV Co. shall take up its insurance policies with any insurance
company permitted under the Chinese laws. The type, amount and
duration of insurance shall be decided by the General Manager.
20 LIABILITY FOR BREACH OF THE CONTRACT
20.1 In the event of any breach of any Party of its obligations under
this Contract or the Articles of Association, the other Party (the
"Non-breaching Party") may issue a written warning requiring the
Party in breach to remedy such breach within one month from
receipt of such warning. In case the Party in breach fails to
remedy the breach the Non-breaching Party may, subject to the
approval of the relevant authority, terminate the JV Co. and this
Contract and/or claim for damages against the Party in breach.
20.2 If the JV Co. or the Non-breaching Party incurs any expense or
additional obligation or liability, including any obligation or
liability to pay money, or suffers any loss, including loss
occurred or loss of profits, as a result of breach of this
Contract, the Party in breach shall indemnify the JV Co. and/or
the relevant Party, as the case may be, for the amount of such
expense, obligation or liability or loss which it has incurred,
including any interest paid, payable or foregone as a result
thereof and for all legal costs incurred in enforcing this
Contract.
21 APPLICABLE LAW
21.1 This Contract, including its formation, existence, validity,
interpretation, execution and termination, shall be governed by
the laws of the PRC.
21.2 If after the signing of this Contract (i) any existing measure of
Chinese law or administrative regulation is changed which is
applicable to the JV Co. or any Party,
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and (ii) such changed or new measure is either to provide for
preferential treatment to or to have an adverse effect on the JV
Co. or any Party, then:
21.2.1 if the changed or new measure is more favorable to the JV
Co. or any Party than the measure in effect on the date
this Contract was signed (and the other Party is not
materially and adversely affected), the JV Co. or the Party
concerned shall promptly take steps necessary to make
applications for obtaining the benefits of such changed or
new measure. The Parties shall use their best efforts to
cause such application to be approved by the relevant
authorities; and
21.2.2 if, because of such changed or new measure, the JV Co.'s or
any Party's economic benefits under this Contract are
materially and adversely affected, directly or indirectly,
the Parties shall consult promptly and make all amendments
to this Contract and the Articles of Association as
necessary to maintain the JV Co. and affected Party's
economic benefits under this Contract.
22 SETTLEMENT OF DISPUTES AND ARBITRATION
22.1 Any disputes arising out of or in connection with this Contract or
the Articles of Association (including any dispute as to the
formation, existence, validity, interpretation, execution and
termination) shall be settled by all Parties through consultation.
22.2 If within three months starting from the date when any dispute
arises no settlement is reached through consultation, the dispute
shall be submitted to the China International Economic and Trade
Arbitration Commission ("CIEAC") for arbitration. The arbitration
shall take place in Beijing, China in Chinese in accordance with
the rules of CIEAC. The arbitration award shall be final and
binding upon both Parties. The arbitration fees and legal costs
shall be borne by the losing Party unless otherwise ordered by the
arbitration tribunal.
23 AMENDMENT AND ALTERATION OF THIS CONTRACT
23.1 Any amendment, alternation or supplement of this Contract shall be
in writing and shall come into force only after it is signed by
the duly authorized representatives of each Party and approved by
the original examination and approval authority.
24 SUPPLEMENTARY ARTICLES
24.1 This Contract, the Articles of Association, Exhibits, and the
Management Agreement constitute the entire agreement among the
Parties concerning the subject matter covered therein and shall
supersede all previous negotiations, discussions, letters of
intent, memorandum of understanding, heads of agreement and
agreements in respect of such subject matter. The terms of this
Contract shall prevail if specific provisions are available in
this Contract, otherwise, the terms of the Articles of Association
and the Management Agreement shall apply.
24.2 Should any article of this Contract or any part thereof be
unenforceable, invalid or void under any applicable law, such
article or part thereof shall not affect the validity or
enforceability of the remaining Articles of this Contract.
24.3 Unless as otherwise expressly provided herein, the failure of a
Party at any time to enforce a provision of this Contract shall in
no way constitute a waiver of its right under the provision or in
any way affect the validity of this Contract or any part hereof or
the right of such Party thereafter to enforce each and every
provision herein.
24.4 Notices to be given under this Contract shall be given by
facsimile or registered airmail to the other Party at addresses
and numbers set out at the beginning of this Contract, or at the
changed addresses or numbers one Party has notified in writing to
the JV Co. and other Party. Notices shall be deemed to have been
duly served if sent by
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registered airmail upon 15th working day from the date of sending,
and if sent by facsimile upon 2nd working day from the date of
dispatch. Where the notice is given by facsimile, the original
copy shall be mailed by registered airmail or hand delivered to
the JV Co. and/or the other Party immediately thereafter.
24.5 The replacement or substitution of the authorized representatives
of any Party shall not in any way affect the validity of this
Contract.
24.6 The Articles 18, 20, 21 and 22 of this Contract shall survive the
termination of this Contract.
24.7 This Contract is written in both Chinese and English and signed in
____________ on the ____ day of _____, _____1999.
24.8 There are 8 copies of this Contract in both English and Chinese.
Each Party shall retain 2 copies of this Contract and the
remaining copies shall be submitted to the examination and
approval or registration authorities. Texts in both languages
shall be equally authoritative.
24.9 This Contract is subject to the approval of the competent
government authorities and shall come into force on the date of
approval.
IN WITNESS WHEREOF the duly authorized representatives of the Parties have
signed this Contract.
Party A: Party B:
Shandong Hengtong Chemical Industrial Asian Alliance Ventures Incorporated
Company Ltd.
Signature:/s/ Wang ▇▇▇▇ ▇▇ Signature: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------ ------------------
Name: Wang ▇▇▇▇ ▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Position: President and general manager Position: President
Date: 18 Aug. 1999 Date: August 18, 1999
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EXHIBIT A (Article 3.5)
The Articles of Association of the JV Co.
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EXHIBIT B (Article 2.3.2)
The map of the Land Use Right contributed from Party A
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EXHIBIT C (Article 2.3.1)
The Equipment, Facilities and Materials contributed by Party A
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EXHIBIT E (Article 5.2)
Factory and Facilities Party A leased to the JV Co.
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