Article 7 PURCHASE OF NEEDFUL MATERIALS
7.1 In purchase of required raw materials, fuel, parts, means of transportation and articles for office use, the joint venture company shall give first priority to purchase in China where conditions are the same.
7.2 In case the joint venture company entrusts Party B to make purchases on overseas markets, persons appointed by Party A shall be invited to take part in the purchasing.
Article 8 SALE OF PRODUCTS
8.1 The product of the joint venture company shall be sold both on Chinese market and on oversea market. The export part accounts for 50%, whereas the other 50% is for domestic market. Party B shall be responsible for the sale of the products abroad.
8.2 The joint venture company may directly sell its products on the international market. It may also sign sales contracts with Chinese or foreign trade companies, entrusting them to be its sales agents.
8.3 The joint venture company may set up sales branches both in China and abroad subject to the approval of the relevant Chinese Department. The function of the sales branches, besides sales, is to collect users comments on product quality and give instructions for the correct use of the products.
Article 9 LABOUR MANAGEMENT
9.1 Labor contract covering employment, dismissal and resignation of the staff and workers of the joint venture company, and their production tasks, wages, awards and punishment, holidays and paid leaves of absence, labor insurance and welfare benefits, labor protection, labor discipline and other matters shall be signed between the joint venture company and the Trade Union of the company as a whole, or between the company and its staff and workers on an individual basis in accordance with the“Regulations of the Peoples Republic of China on Labor Management in Chinese-Foreign Joint Ventures”.
9.2 The labor contract duly signed shall be filed with the local labor management authorities.
9.3 The appointment of high-ranking administrative personnel recommended by both parties, their salaries, social insurance, welfare and the standard of traveling expenses, etc. shall be decided by the board of directors.
Article 10 TAXES, FINANCE AND AUDIT
10.1 The joint venture company shall pay taxes in accordance with the stipulations of Chinese laws and other relevant regulations.
10.2 Staff and workers of the joint venture company shall pay individual income tax according to the“Individual Income Tax Law of the Peoples Republic of China”.
10.3 The joint venture company shall establish its accounting system in accordance with the relevant regulations for financial accounting in China.
10.4 The fiscal year of the joint venture company shall be from January 1 to December 31. All vouches, receipts, statistics statements and reports, account books shall be written in Chinese. English may be used concurrently with mutual consent.
10.5 Financial checking and examination of the joint venture company shall be conducted by an auditor registered in China. Reports shall be submitted to the board of directors and the general manager.
10.6 The manager of the joint venture company shall, within 30 days after the end of its fiscal year, prepare an annual financial statement to submit to the board of directors for examination and approval. The financial statement shall include a balance sheet, profit and loss statement audited and certified as true and correct by an auditor registered in China.
Article 11 DURATION OF THE JOINT VENTURE
The duration of the joint venture company is TEN years commencing from the date on which the business license of the joint venture company is issued. It may be extended for FIVE years upon mutual consent. The application for the extension of the duration shall be submitted to the examination and approval authority SIX months prior to the expiry date of the joint venture company.
Article 12 TERMINATION AND LIQUIDATION
12.1 In case of inability to fulfill the contract or to continue operation due to heavy losses in successive years as a result of force majeure, the duration of the joint venture contract shall be terminated before its expiration after unanimously agreed upon by the board of directors and approved by the original examination and approval authority.
12.2 Should the joint venture company be unable to continue its operation or achieve the business purposes stipulated in the contract on account of the fact that one of the contracting parties fails to fulfill its obligation or seriously violates the stipulations of the contract and article of association, the other party shall have the right to terminate the contract. The termination shall be approved by the original examination and approval authority.
12.3 Liquidation and the distribution of the liquidated assets shall be carried out in accordance with the contract stipulations and the relevant laws and regulations of the Peoples Republic of China.
Article 13 ASSIGNMENT
Assignment may be made if it is agreed upon by both parties as stipulated in Article 3.3. However, it (the assignment) shall neither interrupt the normal operation nor affect the organization structure of the joint venture company during the process of assignment.
Article 14 INSURANCE
During the term of this contract the joint venture company shall effect insurance against various risks preferably with the Peoples Insurance Company of China, which handles claims promptly and equitably.
