Articles Of Association For Joint Ventures

EXHIBIT 10.19


ARTICLES OF ASSOCIATION
FOR JOINT VENTURES
USING CHINESE AND FOREIGN INVESTMENT


SHANGHAI, CHINA
18 MARCH, 1994


ARTICLES OF ASSOCIATION FOR JOINT VENTURES
USING CHINESE AND FOREIGN INVESTMENT


CHAPTER I GENERAL PROVISIONS


ARTICLE 1


In accordance with "The Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment" and the contract, in which two parties agree on setting up Shanghai Southwest Bearing joint venture company Ltd. (hereinafter referred to as the joint venture company), signed by Shanghai Hong Xing Bearing Factory (hereinafter referred to as Party A and Smith Acquisition Company dba. Southwest Products Company of U.S.A. (hereinafter referred to as Party B) in Shanghai, China, the articles of association hereby is formulated.


ARTICLE 2


The name of the joint venture company is Shanghai Southwest Bearing Company Ltd.


The name in Chinese language is ______________.


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The legal address of the joint venture company is at 937, Zhong Shan Nan Yi Road, Shanghai China.


ARTICLE 3


The names and legal addresses of the parties to the joint venture are as follows:


Party A: Shanghai Hong Xing Bearing Factory at 937, Zhong Shan Nan Yi
Road, Shanghai, China


Party B: Smith Acquisition Company dba. Southwest Products Co. of
U.S.A. at 2240, Buena Vista, Irwindale, CA 91706, America


ARTICLE 4


The joint venture company is a limited liability company.


ARTICLE 5


The joint venture company has the status of a legal person and is subject to the jurisdiction and protection of China's laws concerned. All its activities shall be governed by Chinese laws, decrees and other pertinent rules and regulations.


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CHAPTER II PURPOSE AND SCOPE OF BUSINESS


ARTICLE 6


The purpose of the joint venture is to produce and sell spherical bearing products as stipulated in the Contract for Joint Venture, to develop new liner material and bonding technology, and to reach world class level for obtaining satisfactory economic benefits for the parties to the joint venture company.


ARTICLE 7


The business scope of the joint venture company is to design, manufacture and sell spherical bearing products and related modified products, machines; provide after sale-services.


ARTICLE 8
The scale of production of the joint venture company is as follows:


First year: 100,000 units
Second year: 500,000 units
Third year: 600,000 units


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ARTICLE 9


The joint venture company may sell its products on the Chinese domestic market and on the international market, its selling proportion based on annual total output is as following:


First year: 100%
Second Year: 90% for export;
10% for the domestic market
Third Year: more than 90% for export; remaining for the domestic
market.


CHAPTER III THE TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL


ARTICLE 10


The total amount of investment of the joint venture company is $4,600,000. Its registered capital is $7,200,000.


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ARTICLE 11


The investment contributed by each party is as follows:


PARTY A: Investment subscribed is $2,600,000, accounting for 72.22%
of the registered capital, among which,
Technology: $900,000 (was imported for producing steel to
steel and self-lubricating spherical bearings)
Machines and Instruments: $1,100,000
Premises: $600,000


PARTY B: Investment subscribed is $1,000,000, accounting for 27.78%
of the registered capital, among which,
Cash: $800,000
Technology: $200,000 (for manufacturing and bonding self-
lubricating liner)


ARTICLE 12


The parties to the joint venture shall pay in all the investment subscribed according to the time limit stipulated in the contract.


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ARTICLE 13


After the investment is paid by the parties to the joint venture, an accountant who had been registered in China, agreed upon by both parties invited by the joint venture company shall verify it and provide a certificate of verification. According to this certificate, the joint venture shall issue an investment certificate which includes the following items: name of the joint venture; date of the establishment of the joint venture; names of the parties and the investment contributed; date of the contribution of the investment; and the date of issuance of the investment certificate.


ARTICLE 14


Within the term of the joint venture, the joint venture company shall not reduce its registered capital.


ARTICLE 15


Should one party assign all or part of its investment subscribed, written consent shall be obtained from the other party of the joint venture. When one party assigns investment, the other party has preemptive right. Such


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assignment shall not be in violation of United States or Chinese law.


ARTICLE 16


Any increase or assignment of the registered capital of the joint venture company shall be unanimously approved by the board of directors and submitted to the original examination and approval authority for approval. The registration procedures for changes shall be dealt with at the original registration and administration office.


CHAPTER IV THE BOARD OF DIRECTORS


ARTICLE 17


The joint venture shall establish the board of directors which is the highest authority of the joint venture company.


ARTICLE 18
The board of directors shall decide all major issues concerning the joint venture company. Its functions and powers are as follows:


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_____ deciding and approving the important reports submitted by the general manager (for instance: production plan, annual business report, funds, loans, etc.,);


_____ approving annual financial reports, budget of receipts and expenditures, distribution plan of annual profits;


_____ adopting major rules and regulations of the company;


_____ deciding to set up branches;


_____ amending the parties of association of the company;


_____ discussing and deciding the termination of production, termination of the company or merging with another economic organization;


_____ deciding the engagement of high-rank officials such as the general manager, chief engineer, treasurer, auditor, etc.;


_____ being in charge of expiration of the company and the liquidation matters upon the expiration of the joint venture company;


_____ other major issues which shall be decided by the board of directors.


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ARTICLE 19


The board of directors shall consist of six directors, of which four directors shall be appointed by Party A, two by Party B. The term of office for the directors is four years and may be renewed.


ARTICLE 20


Chairman of the board shall be appointed by Party A and vice chairman of the board by Party B.


ARTICLE 21


When appointing and replacing directors, a written notice shall be submitted to the board.


ARTICLE 22


The board of directors shall convene one meeting every year. The chairman may convene an interim meeting based on a proposal made by more than one-third of the total number of directors.


ARTICLE 23


The board meeting will be held in principle on the


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location of the company.


ARTICLE 24


The board meeting will be called and presided over by the chairman. Should the chairman be absent, the vice chairman shall call and preside over the board meeting.


ARTICLE 25


The chairman shall give each director a written notice 30 days before the date of the board meeting. The notice shall cover the agenda, time and place of the meeting.


ARTICLE 26


Should a director be unable to attend the board meeting, he may present a proxy in written form to the board. In case the director neither attends nor entrusts ...