The Joint Venture Contract

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Exhibit 10.11

THE JOINT VENTURE CONTRACT

COMMUNICATION INTELLIGENCE COMPUTER CORPORATION, LTD.


CHAPTER I GENERAL PROVISION

ARTICLE 1

In accordance with the "Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment" and other relevant laws and regulations, ED Computer Software Development Corporation, Jiangsu Province, China, and Communication Intelligence Corporation International, Ltd. in conformity with the principles of equality and mutual benefit and through friendly consultations, agree to jointly invest to set up a Joint Venture Company, Communication Intelligence Computer Corporation, Ltd. (hereinafter also referred to as the "JV"), in Nanjing, the People's Republic of China. The Joint Venture Contract (hereinafter referred to as "Contract") is worked out hereunder.

CHAPTER II PARTIES TO THE JOINT VENTURE

ARTICLE 2.1

Parties to this contract are as follows: Chinese Side: ED Computer Software Development Corporation, Jiangsu Province, China
(hereinafter referred to as Party A), duly registered in Jiangsu, China.


Legal Address:

285 North Zhong Shan Road
Nanjing
Jiangsu Province, China, PRC


Legal Representative:


Name:

Zhou Ping Position: Manager Citizenship: Chinese
American Side:

Communication Intelligence Corporation International, Ltd.
(hereinafter referred to as Party B), duly registered in Bermuda.


Legal Address:

275 Shoreline Drive, Suite 600
Redwood Shores, CA 94065, USA.


Legal Representative:


Name:

James Dao Position: President Citizenship: United States

CHAPTER III ESTABLISHMENT OF THE JOINT VENTURE

ARTICLE 3.1

In accordance with the "Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment" and other relevant Chinese Laws and Regulations, both Party A and Party B agree to jointly invest to set up a Joint Venture Company, Limited (hereinafter referred to as JV).

ARTICLE 3.2

The Chinese name of the JV is:

Communication Intelligence Computer Corporation, Ltd.

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The English name of the JV is:

Communication Intelligence Computer Corporation, Ltd.

The legal address of the JV is:

Nanjing, Jiangsu Province, China, PRC

ARTICLE 3.3

The JV is established by a foreign investor and a Chinese enterprise and has the status of a legal entity subject to the protection of the relevant laws of the People's Republic of China. All its activities shall be governed by Chinese laws, decrees and other pertinent rules and regulations.

ARTICLE 3.4

The organizational form of the JV is a limited liability company, each party to the JV is only liable up to the limit of the registered capital subscribed or to be subscribed by the parties of the JV under the Contract. Subject thereto, the profits, risks and losses of the JV shall be shared by the parties in proportion to their investment of the registered capital.

ARTICLE 3.5

If the government or department of the People's Republic of China adopts new laws, decrees or other pertinent rules and regulations under which the JV or any party to the JV would get more preferential treatment than that under the article of the Contract after the Contract is signed, the parties to the JV and the JV shall cooperate mutually and submit an application at once so as to enjoy the more preferential treatment.

CHAPTER IV PURPOSE, SCOPE, AND SCALE OF PRODUCTION AND BUSINESS

ARTICLE 4.1

The purpose of the JV is in conformity with the desire of both parties to enhance economic and technical cooperation through adoption of the most advanced technology and scientific management methods in order to enhance economic efficiency and obtain a satisfactory financial return through:

1.) The design and creation (system integration) of turnkey multi-user pen input computer systems to automate China's business and government sectors. Systems will use Communication Intelligence Corporations' ("CIC") advanced Chinese language handwriting recognition and pen operating environment to replace and/or supplement traditional keyboard entry. The initial systems will also use IBM AS/400 computers.

2.) Creation of a dedicated Automation Training Institute that will train all levels of personnel. Training will focus upon the principles of modern management, computer operating skills and all phases of computer education required to maximize benefits of the JV's computer systems. The JV plans to train over 50,000 people within the first five years of operations.

3.) Within 18 months, or as opportunities arise, establish a manufacturing operation that will produce key automation products for both the China and export markets.

The JV will endeavor to establish the leading competitive position in terms of quality and price for both overseas and domestic markets.

ARTICLE 4.2

The production and business scope of the JV is to: market and sell the JV's computer products and systems, act as a systems integrator, create Chinese application software, service and maintain computer systems, train managers and end users, and manufacture key products for China and export markets.

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ARTICLE 4.3

The annual production scale for the period 1993-2000 of the JV is forecast in the attached Feasibility Study.

CHAPTER V TOTAL INVESTMENT AND REGISTERED CAPITAL

ARTICLE 5.1

The total investment of the JV is US Dollars Twenty-Five Million only.

ARTICLE 5.2

Investment provided by the Party A and Party B will total US Dollars Ten Million only which shall be registered capital of the JV. This will include: Party A US $ 2,100,000 (21%) Party B US $ 7,900,000 (79%)

ARTICLE 5.3

The planned investment of each party is detailed as follows: Party A: Land Use Rights US $ 2,100,000 Total: US $ 2,100,000
Party B:


Royalty free License of Technologies plus certain Distribution Rights: US $ 2,500,000 Cash: US $ 5,400,000 Total: US $ 7,900,000
Total Registered Capital:

US

$
10,000,000

All Cash amounts shall be provided in US $. See Appendix I for detailed description of the technology which will be invested by Party B. See Appendix II for description of Distribution Rights to be provided.

ARTICLE 5.4

The registered capital of the JV is planned to be paid in five installments by Party A and Party B according to the investment schedule, Appendix IV, and respective investment percentages within two years after the Contract is signed. All planned investment dates after the original signing are subject to change depending on the cash requirements of the JV.

ARTICLE 5.5

If, after application has been submitted for approval by the relevant authority, either of the original parties wishes to transfer all or part of its investment in the JV to a third party, the non-selling original party shall have a right of first refusal to acquire the investments to be transferred. Written notice of intent to transfer shall promptly be made to the non-selling party and the non-selling party shall have 30 business days from notification to acquire the transferred investments. The terms of sale offered to any third party shall not be more preferential than those offered to the non-selling party.

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ARTICLE 5.6

If the JV draws down on the bank loan, the interest expense shall be treated as a production expense and deducted from revenues.

ARTICLE 5.7

The registered capital of the JV may not be reduced within the duration of the JV. Any increases in the registered capital and/or the changes in the investment ratio shall be agreed to by the Board of Directors and approved by the original examination and approval authority. The registration shall also be changed by the organization that provided the original registration.

ARTICLE 5.8

For the duration of the JV, the General Manager should submit a proposal to the Board of Directors for their approval if the JV needs to arrange a bank loan for its operating fund from a bank in China. It is already agreed that the JV will require a loan of US$ 15 Million which will be applied for following the award of the business license.

CHAPTER VI RESPONSIBILITIES OF EACH PARTY TO THE JOINT VENTURE

ARTICLE 6.1

Party A's responsibilities: 6.1.1 Responsible for contributing 21% of the registered capital. 6.1.2 To assist in sales and marketing of the JV's Chinese Business Automation Systems ("CBAS"). 6.1.3 Responsible for preparing and submitting the feasibility study and the economic/financial evaluation to apply for JV approval, to arrange the registration and obtain the business license from the relevant Chinese authorities for establishing the JV. 6.1.4 Responsible for doing preparation work for the JV including: arranging the land and applying the right for using the land from the Pukou and Kunshan Development Zones and/or the Department of Land Administration. 6.1.5 To assist in the design and construction of the various buildings required by the JV. 6.1.6 To assist the JV in selecting its employees, to select and train the suitable professional technical persons and skilled workers. To assist overseas staff in applying for the entry visa, permission of stay, working permission, and processing their traveling matters. 6.1.7 Assist party B to secure favorable customs treatment for items imported for the JV and for resale to customers in China. 6.1.8 To assist the JV for applying/obtaining the tax exemption from relevant authorities, and to provide advice for all other respects. 6.1.9 To provide advice to the management of JV with information on local laws, regulations and other information, thus, the JV can follow the laws and regulations properly to ensure smooth operations. 6.1.10 To assist the JV in arranging necessary loans from Chinese Banks.

ARTICLE 6.2

Party B's responsibilities: 6.2.1 Responsible for contributing 79% of the registered capital.

4 6.2.2 Responsible for providing the seven technologies licensed to the JV (see Appendix I Licensing Agreement) and to help ensure that the JV's engineering personnel are familiar with the seven technologies provided. 6.2.3 Responsible for securing necessary third party products for the JV computer hardware and software on favorable terms that will be incorporated into the CBAS (see Appendix II, Distribution Agreement). 6.2.4 Responsible for the business management of the JV. 6.2.5 Responsible for design and initial integration of CBAS, design of training institute. 6.2.6 Assist in acquisition of training materials from third party vendors. 6.2.7 Responsible for selecting items to be manufactured by JV and securing manufacturing rights for JV (terms to be defined at a later date). 6.2.8 Assisting the sales of the product manufactured by the JV in overseas markets. 6.2.9 To perform and fulfill such other duties as the JV may entrust.

ARTICLE 6.3

All work done by both Party A and Party B for the JV shall be compensated by the JV. Detailed terms shall be decided by the Board of Directors.

CHAPTER VII: TECHNOLOGY LICENSE

ARTICLE 7.1

Party B agrees to provide the JV with seven advanced technologies under the terms outlined in the attached License Agreement (Appendix I). The licensed advanced technologies include: 1. Chinese Handwriting Recognition Software

2. Chinese Pen Operating Environment

3. Dynamic Signature Verification

4. Dynamic Signature Reconstruction

5. Compression of Electronic Ink Utility

6. Pen Application Development Kits

7. Speech Recognition Technology Rights

ARTICLE 7.2

If Party B fails to provide the technology as defined in the License Agreement (Appendix I), Party B should compensate for any direct losses suffered by the JV. In addition, Party A and Party B will meet in a constructive discussion to determine how any delays or problems can be most equitably resolved.

CHAPTER VIII SELLING PRODUCTS

ARTICLE 8.1

It is the intention of the JV to have 50% or more of the JV's manufactured products sold outside of China, as soon as conditions permit, provided that the pricing, quality, and delivery terms of the JV products have reached the standards required in the international market. The rest of the product shall be sold in the domestic market.

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ARTICLE 8.2

The JV has the option to sell export products through Party B's worldwide distribution contacts.

ARTICLE 8.3

The JV has the option to sell its products directly. Agents may also be appointed on a commissioned basis by the General Manager.

CHAPTER IX BOARD OF DIRECTORS

ARTICLE 9.1

The date of the registration of the JV shall be the date of the establishment of the Board of Directors.

ARTICLE 9.2

The Board of Directors shall be composed of five (5) directors, of which two (2) shall be designated by Party A and three (3) shall be designated by Party B. Among the designated directors, Party B shall designate the Chairman and Party A shall designate the Vice Chairman of the Board. The term of the office for Directors, Chairman, and Vice Chairman is four years. They may be reappointed if agreed to by the appropriate designating parties. The composition of the Board of Directors shall be subject to change if the proportion of investment by the parties changes accordingly.

In case either party intends to change its designated board members due to incompetence and/or for other reasons, written notice shall be provided to the other party one month in advance to facilitate clear communications and understanding.

ARTICLE 9.3

The highest authority of the JV shall be its Board of Directors. Unanimous approval from the Board of Directors shall be required before any actions are taken concerning major issues, including: 9.3.1 Amendment of the Articles of Association of the JV. 9.3.2 Extension, termination or dissolution of the JV. 9.3.3 Increase or transfer of the JV's registered capital transfer ownership. 9.3.4 Any merger of the JV with another entity.

ARTICLE 9.4

All other issues to be decided by the Board of Directors shall be by majority vote (over 50%).

ARTICLE 9.5

The Chairman of the Board of Directors is the legal representative of the JV. Should the Chairman be unable to exercise his responsibilities, he shall authorize the Vice Chairman or any other Director to represent him temporarily.

ARTICLE 9.6

The Board of Directors shall convene at least one board meeting every year. The meeting shall be called and presided over by the Chairman of the Board. The Chairman may convene an interim meeting based on a proposal made by more than one-third of the total number of the Directors. Minutes of each meeting shall be placed on file in both Chinese and English.

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CHAPTER X MANAGEMENT OFFICE

ARTICLE 10.1

The JV shall establish a management office which shall be responsible for its daily management. The management office shall have a General Manager and a Deputy General Manager. The General Manager and Deputy General Manager should be appointed by the Board of Directors. The term of the post for the General Manager and Deputy General Manager is two years which may be renewed.

ARTICLE 10.2

The responsibility of the General Manager is to carry out the decisions of the Board and organize/conduct the daily management of the JV. The General Manager shall, within the scope empowered him by the Board, represent the JV in outside dealings, have the right to appoint and dismiss his subordinates, and exercise other responsibilities and rights as authorized by the Board. The Deputy General Manager shall assist the General Manager in his work. The General Manager shall discuss major issues with the Deputy General Manager.

Several department managers may be appointed by the management office, who shall be responsible to the General Manager and Deputy General Manager and carry out the work assigned by the General Manager and the Deputy General Manager.

ARTICLE 10.3

The JV will employ a certain number of non Chinese nationals (hereinafter referred to as "Expatriates") from time to time in key management positions. It is agreed between the parties that a Management Fee Agreement may be required as the most appropriate means of having the JV compensate CIC for some portion of the expenses associated with these Expatriates. The actual Management Fee Agreement will require the approval of the Board before taking effect.

ARTICLE 10.4

In case of malfeasance or serious incompetence on the part of the General Manager or the Deputy General Manager, the Board of Directors may decide to dismiss them at any time.

CHAPTER XI EQUIPMENT PURCHASING

ARTICLE 11.1

In its purchases of required raw materials, fuel, parts, means of transportation, articles for office use, etc., the JV shall give first priority to purchases in China where conditions are the same in terms of price, specifications, quality and service, except for such times that must be imported.

CHAPTER XII LABOR MANAGEMENT

ARTICLE 12.1

Labor contracts covering the recruitment, employment, dismissal and resignation, wages, labor insurance, welfare, rewards, penalty and other matters concerning the staff and workers of the JV shall be drawn up between the JV and its Trade Union as a whole or individual employees in accordance with the "Regulations of the People's Republic of China on Labor Management in Joint Ventures Using Chinese and Foreign Investment" and its implementation rules and the JV's plan as approved by

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the Board of Directors. A copy of the labor contract should be submitted to the Department of Administration for the Employee for file after the labor contract is signed.

ARTICLE 12.2

The treatment of salary and/or wages, social insurance, welfare, and traveling expense, etc. for high ranking administrative personnel should be decided by the Board.

ARTICLE 12.3

The JV shall provide an incentive fund for rewarding employees who have made a contribution to the JV. The actual amount to be reserved shall be decided by the Board based on the status of the JV for each year.

CHAPTER XIII TAX, FINANCE AND AUDIT

ARTICLE 13.1

The JV shall pay taxes and apply for the tax exemption in accordance with the stipulations of Chinese laws and other regulations concerned.

ARTICLE 13.2

Staff members and workers of the JV shall pay individual income tax in accordance with the "Individual Income Tax of the People's Republic of China."

ARTICLE 13.3

The JV shall be exempt from customs duty for the following imported equipment: Machinery, equipment, parts, automobiles and all other materials imported with funds that are part of the JV's total investment.

ARTICLE 13.4

The JV shall create Reserve, Expansion and Employee welfare funds in accordance with the stipulations in "The Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment." The actual percentage to be drawn shall be discussed/decided by the Board based on the status in the JV each year.

ARTICLE 13.5

The JV shall establish its accounting system in accordance with the Internationally used accrual basis and debit and credit standard. All accounts shall be kept in US Dollars.

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The fiscal year of the Accounting System for the JV shall be from January 1 to December 31 every year. All of the accounting vouchers, slips, books, and statements shall be recorded in both Chinese and English versions. Both versions shall have equal authority.

ARTICLE 13.6

The JV shall appoint an auditor for its financial auditing, who is registered in China and has reached international standards. The audit results shall be reported to the Board of Directors and the General Manager.

ARTICLE 13.7

In case Party B considers it is necessary to engage a foreign auditor registered in another country to undertake annual financial auditing, the JV shall give its consent. The expenses thereof shall be borne by Party B.

ARTICLE 13.8

Within 15 days of the end of every month, the JV shall submit the financial report for the previous month and other reports required by the Board of Directors to each Board Member.

CHAPTER XIV DURATION OF THE JOINT VENTURE

ARTICLE 14.1

The duration of the JV is fifty (50) years. The establishment of the JV shall begin on the date on which the business license of the JV is issued.

An application for extending the JV may be proposed by one party and, if unanimously approved by the Board of Directors, should be submitted to the Ministry of Foreign Economic Relation and Trade six months prior to the expiration date of the JV.

An application for applying for nonlimited duration from the relevant authority may be proposed by one party and, if unanimously approved by the Board of Directors, submitted at the appropriate time.

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