THE CHINESE-FOREIGN EQUITY JOINT VENTURE
SHANGHAI IKS LIDA MECHANICAL BLADE CO. LTD.
JOINT VENTURE COMPANY CONTRACT
September 24, 1995
2 Shanghai IKS JVC Contract 2 - --------------------------------------------------------------------------------
TABLE OF CONTENT
PAGE CHAPTER 1 General Provisions 6
CHAPTER 2 Parties to the Joint Venture 7
CHAPTER 3 Establishment of the Joint Venture Company 9
CHAPTER 4 The Purpose, Scope and Scale of Business 12
CHAPTER 5 Total Amount of Investment, Registered
Capital and Additional Funds 13
CHAPTER 6 Responsibilities of the Parties 22
CHAPTER 7 Board of Directors 26
CHAPTER 8 Business Management 31
CHAPTER 9 Labor Matters 36
CHAPTER 10 Transfer of Technology 38
CHAPTER 11 Site, Buildings, Environment 40
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CHAPTER 12 Purchase of Assets, Services, Equipment
and Materials 41
CHAPTER 13 Sale of Products 42
CHAPTER 14 Taxes, Finance, Audit, Profits and
Foreign Exchange 45
CHAPTER 15 Insurance 52
CHAPTER 16 Duration of the Joint Venture Company 53
CHAPTER 17 Amendment and Termination of the Contract 54
CHAPTER 18 Liabilities for Breach of the Contract 59
CHAPTER 19 Force Majeure 61
CHAPTER 20 Applicable Laws 62
CHAPTER 21 Confidentiality and Exclusivity 63
CHAPTER 22 Settlement of Disputes 65
CHAPTER 23 Effectiveness of the Contract and
Miscellaneous 66
4 Shanghai IKS Lida JVC Contract 4 - --------------------------------------------------------------------------------
Annexes:
No. of Pages/
Each Annex Annex A Registration Certificate of Party A 2
Annex B Registration Certificate of Party B 2
Annex C Articles of Association 46
Annex D Party A's Capital Contribution 15
Annex E Party B's Capital Contribution 2
Annex F List of Items Imported Out of the Total
Investment 1
Annex G Product Line 20
Annex H Site and Conditions 2
Annex I1 Technology Transfer Contract (Party A/JVC) 20
Annex I2 Technical Engineering, Consultant, Assistance &
Training Service Agreement (Party B/JVC) 58
Annex J1 Trademark License Contract (Party A/JVC) 12 5 Shanghai IKS JVC Contract 5 - --------------------------------------------------------------------------------
Annex J2 Trademark and Name License Contract
(Party B/JVC) 15
Annex K Export Sales Contract 41
Annex L Service Agreement 13
Annex M List according to Article 59.3 of this Contract 4 6 Shanghai IKS JVC Contract 6 - -------------------------------------------------------------------------------
CHAPTER 1 General Provisions
In accordance with the "Law of the People's Republic of China on China Foreign Equity Joint Ventures", and its supplements (hereinafter the "Joint Venture Law") and other relevant Chinese laws and regulations, the Shanghai Printing & Packaging Machinery General Corporation in Shanghai, People's Republic of China (hereinafter "PRC") and IKS Klingeinberg Far East GmbH. Federal Republic of Germany, agree in this Contract (hereinafter "the Contract") to jointly invest in and establish an equity joint venture company for the development, manufacture, sale and maintenance of mechanical blade products and related equipment products. 7 Shanghai IKS Lida JVC Contract 7 - -------------------------------------------------------------------------------
CHAPTER 2 Parties to the Joint Venture
ARTICLE 1
The Parties to the Contract are:
Shanghai Printing & Packaging Machinery General Corporation of the PRC (hereinafter referred to as "Party A"), a state-owned enterprise registered with the State Administration of Industry and Commerce in Shanghai, PRC, (Registration No.150071100, copy of registration certificate attached as Annex A) and with its legal address at: No. 408 Zhongxing Road, Shanghai, China.
Legal Representative:
Name: Wu Chang-an
Position: General Manager
Nationality: People's Republic of China
IKS Klingeinberg Far East GmbH of the Federal Republic of Germany (hereinafter referred to as "Party B"), registered with the commercial register of Remscheid, Federal Republic of Germany (registration no. HRB 1870, copy of registration certificate attached as Annex B) and with its legal address at: Industriegebiet Bergisch Born, In der Fleute 18, 42897 Remscheid, Federal Republic of Germany.
8 Shanghai IKS Lida JVC Contract 8 - -------------------------------------------------------------------------------
Legal Representative:
Name: Thomas Meyer
Position: Managing Director
Nationality: Federal Republic of Germany
(hereinafter sometimes collectively referred to as the "Parties" and, if the situation requires, in the singular the "Party"). 9 Shanghai IKS Lida JVC Contract 9 - --------------------------------------------------------------------------------
CHAPTER 3 Establishment of the Joint Venture Company
ARTICLE 2
In accordance with the Joint Venture Law and other relevant Chinese laws and regulations, the Parties agree to establish an equity joint venture limited liability company (hereinafter "JVC") to develop, manufacture, sell and maintain certain products in the PRC.
ARTICLE 3
3.1 The name of JVC in Chinese is:
The name of JVC in English is:
Shanghai IKS Lida Mechanical Blade Co. Ltd.
The legal address of JVC is: No. 1205, Hutai Lu Rd., Shanghai, PRC.
3.2 JVC shall consistently use its name in all its activities.
Trademark and Name License Contracts are attached as Annex J1 and Annex
J2 to this Contract.
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Should Party B's share in the registered capital fall below fifty one
percent (51%), Party B may request JVC to change its name to no longer
include "IKS". Should JVC fail to comply with these obligations, Party B
is hereby given the authority to accomplish all relevant steps in order
to change the name.
After the expiration or termination of JVC, neither Party shall be
permitted to the subsequent use of the name of JVC without the consent of
the other Party. Party B shall continue to be free to use or to grant
third parties the right to use the name "IKS" at all times during the
duration and after the termination or expiration of JVC.
ARTICLE 4
All activities of JVC shall be governed by the promulgated and publicly available laws, decrees and pertinent rules and regulations of the PRC.
Activities of the JVC outside the PRC shall comply with applicable foreign laws, decrees and rules and regulations.
ARTICLE 5
JVC shall be a limited liability company. The liability of JVC shall be limited to its total assets. The liability of each Party shall be limited to its contribution to the registered capital. 11 Shanghai IKS Lida JVC Contract 11 - --------------------------------------------------------------------------------
It is understood and agreed that in addition to its share of the registered capital specified in Article 10 below, neither Party shall be obliged hereunder to provide or contribute any further capital to JVC.
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CHAPTER 4 The Purpose, Scope and Scale of Business
ARTICLE 6
The purpose of the Parties in entering into the Contract and establishing JVC are to enhance economic cooperation and technical exchanges between the PRC and the Federal Republic of Germany and to contribute to the development of the production of mechanical blade products in the PRC. The Parties agree to use advanced and appropriate methods for the manufacture of its products and to open new domestic markets and international markets for the products with the aim of raising long term economic results and long term economic benefits for each investor.
ARTICLE 7
7.1 The business scope and scale of JVC shall be the development, production
and sale of mechanical blade products and related equipment products and
providing related technical services.
7.2 Products of JVC are specified in Annex G (hereinafter "the Products").
7.3 The expected and planned annual production capacity of JVC shall be
specified in the Feasibility Study Report, and it is intended to reach a
production output equal to an annual sales value of RMB35,000,000 -
45,000,000 within four (4) to five (5) years.
7.4 Upon decision by the Board of Directors, the JVC may establish branches
in the PRC and other countries.
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CHAPTER 5 Total Amount of Investment, Registered Capital and Additional Funds
ARTICLE 8
The total amount of investment of JVC shall be 4,940,000 US-Dollar.
ARTICLE 9
The registered capital of JVC shall be 2,470,000.00 US-Dollar.
ARTICLE 10
10.1 Party A shall contribute forty-nine percent (49%) of the registered
capital, equivalent to 1,210,000.00 US-Dollar, by contributing the
following:
10.1.1 Machinery, Equipment, Parts and Tools:
(1) machinery, equipment
(2) parts
(3) tools 14 Shanghai IKS Lida JVC Contract 14 - --------------------------------------------------------------------------------
10.1.2 Factory and Office Building
The ownership rights of the factory and office building specified
in List 2 of Annex D.
10.1.3 Land Development Fee
The Land Development Fee for the Site described in Annex H.
The total value of the items described above 10.1.1 - 10.1.3 is
755,000.00 US-Dollars.
10.1.4 An RMB amount equal to 35,000.00 US-Dollars converted from the
development and reserve funds of JVC into registered capital.
10.1.5 Party A shall transfer the ownership of the office and bicycle
parking place, of which value is equal to 19,100 US-Dollars, to
the JVC.
10.1.6 RMB in the amount equivalent to 400,900.00 US-Dollars in cash.
all as specified in Annex D to this Contract. 15 Shanghai IKS Lida JVC Contract 15 - -------------------------------------------------------------------------------
10.2 Party B shall contribute fifty-one percent (51%) of the registered
capital, equivalent to 1,260,000.00 US-Dollar, by contributing the
following:
10.2.1 The share of Sun Lung Industrial Ltd., the previous foreign party
to the JVC, with a value of 315,000.00 US-Dollars.
10.2.2 An amount equal to 15,000.00 US-Dollars converted from the
development and reserve funds of JVC registered capital.
10.2.3 Cash in the amount of 930,000.00 US-Dollars.
all as specified in Annex E to this Contract.
10.3 The amount equal to the difference between the total amount of investment
and the registered capital shall be borrowed by the JVC itself from
banks.
A security to be provided for such loans shall be solely provided by JVC.
Neither Party shall be obliged to provide any security.
10.4 Out of the total investment, machinery, equipment, parts and tools shall
be imported by JVC as listed in Annex F. The Board of Directors may
decide to amend Annex F in accordance with the practical requirements of
the JVC.
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ARTICLE 11
11.1 Payment of the Parties' contributions to the registered capital of JVC
shall be made as follows:
11.1.1 Party A shall make its capital contribution, as defined in
Article 10, within the time frame specified in Annex D as
follows:
-- The ownership of Machinery, Equipment, Tools and Parts as per
item 1.1 of Annex D of the Contract, shall be provided by
Party A to the JVC within two (2) weeks after the date of
the issuance of the business license of the JVC showing
Party B as Party to JVC (hereinafter referred to as "Revised
Business License").
-- The factory and office building, per List 2 of Annex D, shall
be transferred as per the date of issuance of the Revised
Business License of the JVC and shall be considered effected
upon issuance of a building ownership certificate for JVC.
-- The land development fee provided as per item 1.3 of Annex D
shall be transferred to the JVC within two (2) weeks after
the date of the issuance of the Revised Business License of
the JVC.
-- The amount converted from the development and reserve funds
into registered capital shall be effected on the date of
issuance of the Revised Business License of JVC. 17 Shanghai IKS Lida JVC Contract 17 - --------------------------------------------------------------------------------
-- The ownership of the office and bicycle parking place as per
item 1.5 of Annex O shall be transferred to the JVC as per
the date of issuance of the Revised Business License of the
JVC.
-- Party A shall contribute its cash contribution to the JVC's
bank account within ninety (90) days upon the date of
issuance of the Revised Business Licence of the JVC.
11.1.2 Party B shall make its capital contributions, as defined in
Article 10, within the time-frame specified in Annex E as
follows:
-- The value of the share acquired by Party B from Sun Lung
Industrial Ltd. shall be considered effected on the date of
the Revised Business License of the JVC.
-- The amount converted from the development and reserve funds
shall be considered effected on the date of issuance of the
Revised Business License.
-- Party B shall contribute fifteen percent (15%) of its cash
contribution to the JVC's bank account within ninety (90)
days, and the remaining cash contribution within six (6)
months after the date of issuance of the Revised Business
License of the JVC. 18 Shanghai IKS Lida JVC Contract 18 - --------------------------------------------------------------------------------
Party B's cash contribution shall be paid in US-Dollar and its
value in RMB, calculated according to the official exchange rate
of the PRC at the date of such payment shall not influence its
share to the registered capital as per the date of signing of
this Contract.
11.2 Neither Party shall be obliged to make any capital contribution until
each of the following conditions precedent has been fulfilled (or waived
by both Parties):
(1) The existing joint venture company between Party A and
Consolidated Deed & Development Inc., USA, i.e. Shanghai Zhen Dong
Da Mechanical Blade Co. Ltd., has been terminated and the business
license been returned to the Shanghai Administration for industry
and Commerce.
(2) Receipt of a confirmation by a bank to grant a loan covering the
amount equal to the difference between the total amount of
investment and the registered capital of the JVC.
(3) The business license of Shanghai IKS Mechanical Blade Co., Ltd.
established with joint investment by Party A and Party B, has been
issued.
(4) The business license of Shanghai Achieve Mechanical Blade Co., has
been revised showing Party B as Party to it.
(5) The JVC has obtained a land use right certificate concerning the
land use rights for the Site described in Annex H in accordance with
the conditions described in Annex H.
19 Shanghai IKS Lida JVC Contract 19 - --------------------------------------------------------------------------------
ARTICLE 12
Capital contributions shall be verified by a registered certified public accountant of the PRC, who shall issue a report verifying the capital contributions of each Party to date within sixty (60) days after the respective capital contribution has been made. JVC, on the receipt of correct and effective verification reports, shall issue a Certificate of Capital Contribution to each Party.
If the value of any capital contribution verified by the registered certified public accountant exceeds the value set forth in Article 10.1 or 10.2, any surpassing amount shall be paid back by the JVC to the respective Party within thirty (30) days after receipt of the Capital Contribution Certificate. If its value is less than the value set forth in Article 10.1 or 10.2, the less amount shall be made up in cash by the respective Party within thirty (30) days after receipt of the Capital Contribution Certificate.
ARTICLE 13
During the duration of JVC, the Parties may not reduce the registered capital of JVC, and neither Party may reduce its amount of capital contribution.
The registered capital of JVC may be increased upon unanimous decision made by the Parties who shall then cause their nominees to the Board of Directors to approve such increase and submit it to the examination and approval authority for approval.
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ARTICLE 14
14.1 Neither Party shall sell, assign, mortgage, pledge or otherwise transfer
all or any part of its share of the registered capital to a third party
without the written consent of the other Party and approval of the
examination and approval authority.
14.2 If one Party wishes to assign, or otherwise transfer all or any part of
its share of the registered capital to a third party, the other Party
shall have a preemptive right to purchase the interest to be assigned on
terms and conditions no less preferential than those offered to the third
party; the other Party shall exercise such preemptive right within sixty
(60) days after receipt of notice of such assignment or transfer
(including name of transferee, proposed sales price and proposed terms),
otherwise such right shall be deemed forfeited and the Party shall be
free to assign or otherwise transfer its share of the registered capital
to such third party within another sixty (60) days at a price not less
than the offered price.
Any assignment or transfer in violation of this Article shall render such
assignment or transfer invalid.
14.3 In the event that:
-- 50% or more of the share of either Party is acquired by a third party;
or
-- substantially all of the assets of either Party are acquired by a
third party; or
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-- a competitor of a Party owns or exercises voting control of over 15%
of the shares of such Party; or
-- a Party merges with or into another entity in a transaction in which
such Party is not the surviving corporation.
then the other Party shall have the right to purchase all (but not
less than all) of the shares of JVC held by such Party and such
Party shall be deemed to have consented to such purchase.
14.4 No sale, assignment, mortgage, pledge or other transfer of an interest in
JVC under this Article shall become effective until all necessary
approvals in form and substance, acceptable to the Parties; have been
obtained.
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CHAPTER 6 Responsibilities of the Parties
ARTICLE 15
In addition to the Parties' joint responsibility to work to attain the goals of JVC, each Party shall be responsible for the following matters and activities.
15.1 Party A shall be responsible for:
(1) Making its capital contribution in accordance with the Contract;
(2) Provide services as specified in Annex L;
(3) Preparing and submitting applications for and procuring all relevant
PRC approvals and authorizations required in connection with the
share transfer, expansion of registered capital, modifications to
the JVC Contract and Articles of Association, as well as
corresponding changes to the registration and operation of JVC, all
which may from time to time be required, provided that Party A shall
inform Party B and provide Party B with copies of all relevant
approval documents and only if the terms are satisfactory to both
Parties, proceed with necessary measures; and conducting effective
liaison with relevant Chinese departments as required on all other
matters relating to the establishment and all subsequent activities
of JVC. 23 Shanghai IKS Lida JVC Contract 23 - --------------------------------------------------------------------------------
(4) Make efforts in preparing and submitting applications for and
procuring Foreign Exchange Registration Certificate for JVC issued
by the State Administration of Exchange Control, and the
Confirmation Certificate from the relevant PRC Foreign Economic
Relations and Trade Department certifying that JVC qualifies as and
receives special preferences granted to Technologically Advanced
Enterprises according to the "Provisions of the State Council of the
People's Republic of China for the Encouragement of Foreign
Investment", dated October 11, 1986 (hereinafter "Encouragement
Provisions"), as supplemented, and receives all further preferences;
(5) Obtaining for JVC the land use rights for the Site described in
Annex H in accordance with the conditions described in Annex H;
(6) Assist in obtaining and securing the normal supply for JVC of
electricity, gas, telecommunication, water and heating necessary for
the operation of JVC and make efforts to obtain it at no higher cost
than that paid by state-owned enterprises in Shanghai;
24 Shanghai IKS Lida JVC Contract ...
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