SINO-FOREIGN JOINT VENTURE
GUANGDONG UTSTARCOM TELECOMMUNICATION CO. LTD.
CONTRACT
ARTICLE 1 GENERAL
In accordance with the 'Law of the People's Republic of China
Sino-Foreign Equity Joint Venture enterprise' and other relevant laws and
regulations, Chinese Guangdong Nanfang telecommunication Group Co. and UTStarcom
Inc., adhering to the principle of equality and mutual benefit, agree to jointly
invest to set up a joint venture enterprise. The contract hereunder worked out.
ARTICLE 2 PARTIES OF THE JOINT VENTURE
Chinese Guangdong Nanfang telecommunication Group Co. (hereafter
referred to as Party A), registered with Guangzhou City of Guangdong province in
China, and its legal address is at Guangzhou City.
Legal representative: Name: Li Yisheng
Position: Chairman of the board
Nationality: China
UTStarcom Inc. (hereafter referred to as Party B), registered in
U.S.A., and its legal address is at Alameda, California, U.S.A.,
Legal representative: Name: Lu Hongliang
Position: CEO
Nationality: U.S.A.
ARTICLE 3 ESTABLISHMENT OF JOINT VENTURE COMPANY
3.1 In accordance with the 'Law of the People's Republic China on
Sino-Foreign Equity Joint Ventures Enterprise' and other relevant laws and
regulations, both parties of the Joint venture agree to set up a equity joint
venture company in business of manufacturing and operating telecommunication
equipment.
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3.2 The name of joint venture company is Guangdong UTStarcom telecom
Co. Ltd. The name in English is: GUANGDONG UT STARCOM TELECOM CO. LTD. The legal
address of the joint venture company is No. 4, JiangBei YunShan DongLu, Huizhou
City, Guangdong province, P.R.C.
3.3 All activities of the joint venture company shall be governed by
the laws, decrees and pertinent rules and regulations of the People's Republic
of China.
3.4 The organization form of the joint venture company is a limited
liability company. The profit, risks and losses of the joint venture company
shall be shared by the parties in proportion to their contributions of the
registered capital.
ARTICLE 4 THE PURPOSE OF THE JOINT VENTURE COMPANY
The joint venture company will operate on the basis of fair, legality,
equality, mutual benefit, and enhance the economic cooperation and technical
exchanges, to raise economic results and ensure satisfactory economic benefits
for each party by improving the product quality, decreasing the cost, quickly
delivery, and improving after-sale service, and gaining competitive position in
the world market and national market through advanced, appropriate and
scientific management.
ARTICLE 5 THE PRODUCTS AND BUSINESS SCOPE
The joint venture company manufacture and operate telecom subscriber
access network set product, provide maintenance service after the sale of the
products; research and develop new products. The production scale may be:
output value for the year 1996 is [*]; output value for the year 1997 is [*].
The production scale may be increased with needs of the market.
5.1 Starting period: joint manufacture and sale of optical terminal
products [*] by using [*] technology; digital loop carrier system [*];
high-rate digital subscriber lines HDSL; Access network systems [*] and [*];
products used for the connection of intelligent network and other products
relevant to subscriber access network.
5.2 Joint develop manufacture period: manufacture and sale of access
network systems incorporating digital loop system [*] and other subscriber
access products.
5.3 The products manufactured and operated by the joint venture company
shall be exclusive in [*] market and both parties shall not solely or with other
third party to establish a company to manufactured and sale the same products
the joint venture company manufactured.
ARTICLE 6 TOTAL AMOUNT OF INVESTMENT AND THE REGISTERED CAPITAL
6.1 The total amount of investment of the joint venture company is
[*]. The registered capital is US$2.4 million. Party A shall invest [*],
accounting for 51% of the total amount of investment, and Party B shall
invest [*], accounting for 49% of the total amount of investment.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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Party A will pay [*], accounting for 51% of the registered capital; and
Party B will pay [*], accounting for 49% of the registered capital.
6.2 Party A shall contribute the ReiMinBi equivalent to be determined
in accordance with the quoted rate of exchange published by the people's bank of
China on the month of payment. Party B shall contribute US dollar in cash.
6.3 The registered capital shall be paid in two installments. The first
installment shall be remitted amount of [*] within [*] after the date
of issuance of the joint venture company's business license. The second
installment will be [*], it shall be remitted within [*] after the date
of issuance of the business license.
6.4 The net profit at the end of the year shall be determined in
accordance with the quoted rate of exchange for RMB and USD published by the
people's bank of China.
6.5 In case any party to the joint venture intends to assign all or
part of his investment subscribed to a third party, consent shall be obtained
from the other party to the joint venture, and approval from the examination and
approval authority is required. When one party to the joint venture assigns all
or part of his investment, the other party has preemptive right.
ARTICLE 7 RESPONSIBILITY OF EACH PARTY TO THE JOINT VENTURE
7.1 Responsibilities of Party A:
- Handling applications for approval, registration, huskiness
license; Organizing the design and decoration of the
engineering facilities of the joint venture company; and
handling processing import and export Customs declaration and
transportation within Chinese territory;
- Assisting the joint venture in recruiting Chinese management
personnel, technical personnel, workers and other personnel
needed;
- Assisting the joint venture in developing domestic products
market;
- Assisting foreign workers and staff in applying for the entry
visa;
- Responsible for handling other matters entrusted by the joint
venture company.
7.2 Responsibilities of Party B:
- Handling selecting advanced and suitable equipment and
providing relative information, selecting good quality and
importing good quality equipment;
- The importing contract shall be approved by the board of
meeting and send to the authority for control;
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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- Providing free manufacturing technology for the current
products and training for the management of the joint venture
company.
- Responsible for handling other matters entrusted by the joint
venture company.
ARTICLE 8
8.1 Party B is possessed of the starting products technology, and
responsible for passing on the technology to the technical personnel of the
joint venture company; the joint venture company and Party A shall not disclose
or licenses the starting technology. The technology developed after the joint
venture company established shall be possessed by the joint venture company.
Party A and Party B shall not disclose and license the technological secrets.
8.2 Party A responsible for the provide market for the products of the
joint venture company, especially in Guangdong. In the same conditions, the
products of the joint venture company shall be given priority for using in
Guangdong province. And Party A shall assist to the joint venture company to
publicize the products and extend influence.
ARTICLE 9 SELLING OF PRODUCTS
9.1 The products of joint venture company will be sold both on the
Chinese market and on overseas market, the export part accounting for [*], [*]
for domestic market. With the development of the production scale, the
proportion of the export will be increased.
9.2 The market for the products of the joint venture company will
based in Guangdong and radiate to [*].
ARTICLE 10 THE BOARD OF DIRECTORS
10.1 The date of registration of the joint venture company shall be the
date of the establishment of the board of directors of the joint venture
company. The board of directors are composed of five directors, of which 3 shall
be appointed by Party A, 2 shall be appointed by Party B. The chairman of the
board shall be appointed by Party A, and its vice-chairman by party B. The
highest authority of the joint venture company shall be its board of directors.
It shall decide all major issues. As for other matters, approval by majority
shall be required. The chairman of the board is the legal representative of the
joint venture company. Should the chairman be unable to exercise his
responsibilities for some reasons, he shall authorize the vice-chairman or any
other directors to represent the joint venture company temporarily.
10.2 The board of directors shall convene at least one 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
three third of the total number of directors. Minutes of the meeting shall be
filed.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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ARTICLE 11 BUSINESS MANAGEMENT
11.1 The joint venture company shall establish a management office as
follows: General manager Office, development department, marketing department,
financial department, production department. With the development of the
business, the joint venture company may set up office or branch overseas and
Hong Kong area.
11.2 The joint venture company shall have a general manager, appointed
by Party B, two deputy general managers, appointed by the general manager,
invited by the board of directors.
11.3 The responsibility of the general manager is to report to the
board of directors and carry out the decision of the board meeting and organize
and conduct the daily manufacture, technology and management of the joint
venture company. The general manager represent the joint venture company within
the scope of authorized by the board of directors. And the general manager have
right to appoint and remove personnel's and conduct other duty authorized by the
board of directors. Deputy managers shall assist the work of the general
manager. In case the general manager unavailable, deputy managers shall
represent the duty of the general manager.
11.4 The term of office for the general manager and the deputy managers
is four years whose term of office may be renewed if continuously invited by the
board of directors.
11.5 The Chairman, Vice Chairman and other Directors may hold posts
concurrently as General Manager, Deputy General Manager and other high-level
positions appointed by the Board of Directors.
11.6 The General Manager, Deputy General Manager shall not hold
concurrent high-level positions in other economic organizations, and shall not
participate in other organizations in competition with the Company.
11.7 The general Manager, Deputy General Manager and other high-ranking
staff shall submit written notice in three months' advance when they decide to
resign.
11.8 During the period of preparation and construction, a preparation
and construction office shall responsible for the joint venture company. The
preparation and construction shall have one director appointed by Party A and
vice director appointed by Party B. Appointed by Party B, it have members.
In case the above members have actions of graft and corruption, they can be
removed by the resolution of the board of directors and find out who will be
blame.
ARTICLE 12 LABOR MANAGEMENT
12.1 The appointment of high-ranking administrative personnel
recommended by both parties, their salaries, social insurance, welfare and the
standard of traveling expenses etc. shall decided by the board of directors.
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12.2 Labor contract covering the employment, dismissal and resignation,
wages, labor insurance, warfare, rewards, penalty and other matters shall be
drawn up, approved by the board of directors and implement. The labor contract
shall, after being signed, be filed with the local labor management department.
12.3 The staff and workers of the Company have the rights to set up a
labor union and to develop labor union activities in accordance with the Labor
Union Law of the People's Republic of China. The employees have right to set up
trade union.
ARTICLE 13 TAXES, FINANCE ACCOUNTING AND FOREIGN CURRENCY
13.1 The fiscal year of the joint venture company shall be from January
1 to December 31. All vouchers, receipts, statistic statements and reports,
account books shall be written both in Chinese and English.
13.2 The joint venture of company shall pay taxes due in accordance
with the Income Tax Law of the People's Republic of China for Foreign Investment
Enterprises and Foreign Enterprises, and apply for enjoying favorable treatment
in accordance with relevant regulations.
13.3 The joint venture of company shall pay individual income taxes
according to relevant regulations of the Individual Income Tax Law of the
People's Republic of China.
13.4 Allocation for reserved funds, expansion fund of the joint venture
company and welfare funds and bonuses for staff and workers shall be set aside
in accordance with the stipulations in the 'Law of the People's Republic of
China on Sino-foreign Equity Joint Venture enterprises.' The proportions of
allocations shall be decided by the board directors according to the business
situations of the joint venture company.
13.5 Financial auditing of the joint venture company shall be conducted
by an auditor registered in China and reports shall be submitted to the board of
directors and general manager. If Party B propose to employ a foreign auditor
registered in other country to undertake annual financial audit, Party A shall
give its consent. All the expenses shall be borne by Party B.
13.6 In the first three months of each fiscal year, the manager shall
prepare previous year's balance sheet, profit and loss statement and proposal
regarding the disposal of profits, and submit them to the board of directors for
approval.
ARTICLE 14 DURATION OF THE JOINT VENTURE
14.1 The duration of the joint venture company is 20 years. The
establishment of the joint venture company shall start from the date on which
the business license of the joint venture company is issued. An application for
the extension of the duration, proposed by one party and unanimously approved by
the board of directors, shall be submitted to the authority six months prior to
the expire date of the joint venture.
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14.2 Upon the expiration of the duration or termination before the date
of the expiration of the joint venture, liquidation shall be carried out
according to relevant laws. The liquidated assets shall be distributed in
accordance with the proportion of investment contributed by Party A and Party B.
ARTICLE 15 LIABILITIES FOR BREACH OF CONTRACT
15.1 Should either Party A or Party B fails to pay on schedule the
contributions in accordance with the provisions defined in article 5 of this
contract, the breaching party shall pay to the other party 0.05% per day of the
contribution starting from the first 30 days after exceeding the time limit.
Should the breaching party fails to pay after 90 days, it shall pay 4.5% of the
contribution to the other party, who shall have the right to terminate the
contact and to claim damages to the breaching party.
15.2 Should all or part of the contract and its appendices be unable to
be fulfilled owing to the fault of one party, the breaching party shall bear the
responsibilities thus caused. Should it be the fault of both parties, they shall
bear their respective responsibilities according to actual situations.
15.3 In order to guarantee the performance of the contract and its
appendices, both Party A and Party B shall provide each other the bank
guarantees for the performance of the contract.
ARTICLE 16 THE AMENDMENT, TERMINATION AND DISSOLUTION OF THE CONTRACT
16.1 Amendment of the contract or other appendices shall come into
force only after the written agreement signed by Party A and Party B and
approved by the original examination and approval authority.
16.2 In case of inability to continue operation due to heavy losses in
successive years or inability to fulfill the contract in accordance with
stipulated in article 15.1, the contract shall be terminated before the time of
expiration after unanimously agreed upon by the board of directors and approval
of approval authority.
ARTICLE 17 INSURANCE
All risks insurance policies of the joint venture company shall
underwritten with The People's Insurance Company of China. The detailed matter
shall be fulfill in accordance with the stipulations of the approval authority.
ARTICLE 18 FORCE MAJEURE
Should either of the parties to the contract be prevented from
executing contract by force majeure, such as earthquake, typhoon, flood, fire
and war and other unforeseen events, and their happening and consequences are
unpreventable and unavoidable, the prevented party shall notify the other party
by cable/fax on written without any delay, and with 15 days thereafter provide
the detailed information of the events and a valid document for evidence issued
by the relevant public
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notary organization for explaining the reason of its inability to execute or
delay the execution of all or part of the contract. Both parties shall,
through consultations, decide whether to terminate the contract or to exempt
the part of obligations for implementation of the contract or whether to
delay the execution of the contract according to the effects of the events on
the performance of the contract.
ARTICLE 19 ARBITRATION
19.1 Any disputes arising from the execution of, or in connection with
the contract shall be settled through friendly consultations between both
parties. In case no settlement can be reached through consultations, the
disputes shall be submitted to Chinese arbitration organization. The arbitration
award is final and binding upon both parties.
19.2 During the arbitration, the contract shall be executed
continuously by both parties except for matters in disputes.
ARTICLE 20 EFFECTIVENESS OF THE CONTRACT
20.1 The terms under this contract and its appendices (including joint
venture company articles of association) are integral part of this contract.
20.2 The contract and its appendices shall come into force beginning
from the date of approval of the approval authority.
20.3 Should notices in connection with any party's rights and
obligations be sent by either party A or Party B by telegram or telex, etc., the
written letter notices shall be also required afterwards. The legal addresses of
party A and Party B listed in this contract shall be the posting addresses. In
case the legal addresses change, the notice shall be sent to the other party
prior to thirty days.
ARTICLE 21 GOVERNING LAW
The formation of this contract, its validity, interpretation, execution
shall be governed by related laws of the People's of Republic of China.
ARTICLE 22 LANGUAGE
22.1 The contract shall be written in Chinese.
22.2 The headings in this agreement are inserted for convenience only
and shall not be used to explain the contract.
Party A: Chinese Guangdong Nanfang telecommunication Group Co.
Party B: UTStarcom Inc.
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Date: Dec. 8, 1995
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Sino-Foreign Guangdong UTStarcom Telecommunication Co. Ltd. Joint Venture Contract - Chinese Guangdong Nanfang Telecommunication Group Co. and UTStarcom Inc.
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