Collaboration Agreement

Collaboration Agreement

This agreement is made at Calcutta on this 15th day of July 1999 between DELCO Limited, a company registered under the Companies Act 1956 and carrying on business at 5 Indra Prastha Marg, New Delhi 110 002, India (hereinafter referred to as the DELCO which term shall include, unless the context otherwise requires, its successors and assigns) of the one part and Japan Co. Ltd., a company registered under the appropriate laws of Japan and carrying on business at Cobe Road, Japan (hereinafter referred to as the JAPCO which expression shall, unless its context otherwise requires, include its successors and assigns) of the other part.

WHEREAS DELCO is carrying on business as manufacturer of, dealer in and exporter of electronic goods and has considerable technical knowledge regarding the manufacture of electronic products and information about the marketing possibilities of such products.

AND WHEREAS JAPCO is also carrying on business as manufacturer and exporter of electronic goods and has considerable know-how in this regard and intends to expand its business in collaboration with DELCO.

AND WHEREAS a joint team of DELCO and JAPCO made a detailed study of possibilities of setting-up of a Joint-manufacturing and exporting unit in India availing of the local infrastructure advantages and the expertise of DELCO and JAPCO to the mutual benefits of the parties herein.

AND WHEREAS the parties have agreed to procure formation and incorporation in West Bengal of a company with the main object of manufacturing electronic goods for exports.

AND WHEREAS the parties have agreed to assist each other and the said company to be incorporated by making available to the new company latest plant, machinery and the technical know-how, technical services, technical assistance and arranging for buy-back and exporting the products of the new company.

AND WHEREAS JAPCO has agreed to make a feasibility study and supply to the new company the latest plant, machinery, furnish latest technical know-how, information, assistance and trained personnel in the manufacture of electronic products by the said new company and to render financial assistance by subscribing to the shares of new company that may be issued to the extent of 49% and also in supplying on credit plant, machinery, technical know-how information and assistance which will be liquidated gradually by the new company within
10 years.

AND WHEREAS  the parties have agreed that this collaboration will be subject to obtaining all necessary approvals, licences, permissions, authorisations and consent of the concerned authorities and that the said consents, approval or authorisations will be applied for and obtained by both parties jointly and/or severally assisted by the other.

Now this agreement witnesseth and it is hereby agreed by and between the parties hereto as follows:

1. The new company to be formed shall be a public limited company to be incorporated under the Companies Act 1956 in accordance with the terms of this agreement having its registered office at ……………………………… ……………… under the name and style of “JOINT CO. Ltd.” (hereinafter referred to as the “JOINT CO.”).

2. The JOINT CO. will have as its principal objects the manufacturing of all kinds of electronic products, machinery, consumer goods and all sorts of articles for sale in the domestic market as also export to other countries.

3. The JOINT CO. would have an authorised share capital of Rs. 1,000 crores divided into 100 crores Equity shares of Rs. 10 each. The initial issued, subscribed and paid-up capital would be Rs. 800 crores.

4. The Memorandum of Association and Articles of Association of the JOINT CO. proposed to be registered with the Registrar of Companies have to be approved by the Board of Directors of DELCO and JAPCO.

5. DELCO, Financial Institutions and members of the public shall be offered for subscription 51% of shares proposed to be issued for subscription by the JOINT CO.

6. JAPCO shall subscribe to and pay for the shares of JOINT CO. to the extent of 49% of the proposed issue of shares and pay for the same either in cash or kind.

7. The JOINT CO. shall have directors not less than five and not more than eleven.

8. DELCO and JAPCO shall exercise their voting rights at the General Meetings or Board Meetings in accordance with the terms and spirit of these presents.

9. The parties herein shall not without consent of each other in writing cause or allow any increase in or reorganisation of the share capital or alter the provisions of Memorandum of Association or the Articles of Association contrary to the rights and obligations of the parties herein.

10. The parties herein will have access to the books of accounts and other records of the JOINT CO. through their authorised representatives.

11. The JOINT CO. after incorporation shall ratify, consent, adopt and agree to be bound by the provisions of these presents.

12. In the event of impossibility of carrying on business of JOINT CO. in collaboration between the parties each party would be entitled to buy the shares of the other party at the valuation to be made by appointing an Auditor to be approved by the parties. In the event of such an arrangement failing then the party, intending to going out of the Collaboration Agreement may dispose of its shares in the JOINT CO. in the manner it thinks best.

13. DELCO agrees to procure suitable land for the purpose of settingup of a factory for the JOINT CO. DELCO agrees to take up the work of construction of the factory premises in accordance with the plan and design to be prepared by the parties herein jointly.

14. The cost of land and the cost of construction will be reimbursed by the JOINT CO. either by payment of cash or by the allotment of shares.

15. It is agreed that JAPCO shall make the feasibility study of the proposed project, market survey, profitability, cash-flow projections and prepare comprehensive project report, provide manufacturing technology, assist in manufacture and development of electronic goods, assist in research and quality control of raw materials and finished products and explore the possibilities of obtaining local substitutes acceptable to customers, advice proper marketing, selling and distribution techniques, advice production planning to achieve optimum capacity utilisation of plant and machinery, assist in settingup infrastructure, including ancillary small and medium-scale industries for the growth and development of the business of JOINT CO. and generally to assist and advise to adapt to the changed situation in technology demand pattern of all markets.

16. JAPCO guarantees that the plant proposed to be set up by import of plant machinery and other articles from JAPCO would be capable of producing electronic goods in the required quantities and of the world standard of quality.

17. JAPCO shall furnish and/or provide to the JOINT CO. (a) detailed plans, blue prints, specifications, information and other data to enable the contractors to construct and make arrangement for production facilities at the factory site, capable of utilising the optimum capacity of the plant and machinery to be supplied and installed for production and for additions and expansions;

(b) technical information data and render all assistance necessary to ensure effective operation and maintenance of the machinery and equipment, supply spare parts, maintenance manuals, operating instructions, manuals relating to the construction and assembly of each plant, machinery and equipment and instructions regarding start up and shut down and shall depute a technical personnel to explain and train the employees of JOINT CO. in proper maintenance of the whole unit;

(c) all technical assistance and advice for operation for the plant including scheduling of material, specifications and ordering, production techniques, production planning, quality control, recommended safety procedures and methods and other industrial engineering activities in connection with the organisation, planning and development and operating tactics to obtain most efficient use of production facilities and on all aspects of plant operation and training of the personnel of JOINT CO. in giving effect to the aforesaid;

(d) all technical information and assistance as shall be necessary to keep the JOINT CO. abreast with the latest advancement in technology and utilise the same in its manufacture, sale and export of electronic goods;

(e) training and technical assistance to five operating employees of JOINT CO. for at least 3 months each for which the JOINT CO. shall bear and pay only for the transport expenses and salaries of such trainees and all other expenses and costs of these trainees shall be borne by JAPCO. JAPCO shall make arrangements for compliance with all formalities for such trainees for entering into and staying in Japan and obtaining training in the factory of JAPCO;

(f) qualified personnel for assembly and installation of plant and equipment supplied by JAPCO and JOINT CO. Such qualified personnel shall be responsible for start up production and continue to remain with the JOINT CO. till the commercial production starts;

(g) a competent personnel to plan and organise to procure raw materials, production in the factory of JOINT CO., marketing and exporting electronic goods to the world markets. JOINT CO. will bear and pay for all expenses of the personnel that JAPCO may depute at the factory of the JOINT CO. but their salaries shall be paid by JAPCO.

18. JAPCO shall assign to the JOINT CO. all the JAPCO’s right, title and interest in all its present and future Patents, Trade Marks and Trade Names in relation to electronic goods.

19. JAPCO shall grant to JOINT CO. the right of an exclusive Licensee for the whole world for all Patents in relation to electronic goods for their production, manufacture, use, sale and export anywhere in the world.

20. JAPCO shall assign its right, title and interest in all licences held by it for production, manufacture, use and export of electronic goods.

21. The right, title and interest in or to the use of technical data which JAPCO at any point of time is entitled to use shall be assigned to JOINT CO. for production, sale, marketing the export of electronic goods.

22. JAPCO agrees to execute all such documents as JOINT CO. may require to give effect, perfect, confirm, record assignments and transfers to the JOINT CO. all the JAPCO’s Patents, Licences, Sub-licences and technical data.

23. JAPCO will be responsible for maintaining standards and quality of the products of JOINT CO. and for making available all technical know-how and other assistance to JOINT CO. for making the venture a success.

24. JAPCO will depute its trained personnel both technical and managerial every half year to inspect and examine the operation of plant and machinery, product quality, marketing and export and suggest improvement in production techniques, marketing and exporting the products to enable JOINT CO. to remain efficient and competitive compared to similar industries in the world. Cost and expenses of such personnel other than salaries and remuneration shall be borne and paid by the JOINT CO.

25. JAPCO will not charge any Royalty or fees for rendering the services or furnishing know-how or deputing technical hands or assisting in production, improvement thereon and export of the same but would be entitled to reimbursement of actual extra costs incurred for rendering these services. JOINT CO. will reimburse the expenses of the technical personnel while stationed in West Bengal.

26. JAPCO will purchase from JOINT CO. at least 80% of its products on cost plus 30% profit basis and assist in exporting the balance quantity of products of the JOINT CO. to the World market.

27. It is hereby agreed and declared that all feasibility study report and reports of the project, market survey, profitability, drawings, specifications, advises and all other documents of DELCO, JAPCO and JOINT CO. shall be held in strict confidence and secrecy and shall not be disclosed by any of the parties herein or the JOINT CO. or any of the employees of any of these three companies without obtaining prior written permission from all these three companies.

28. It is agreed and understood that this agreement shall be subject to prior approvals being obtained by delco from the authorities concerned in India, japco from the appropriate authorities in India and Japan and compliance of the provisions of law by joint co. If the requisite approvals cannot be obtained within 36 months from the execution hereof then, unless the parties otherwise agree, this Agreement shall stand terminated.

29. It is agreed that no party to this agreement shall be responsible for any failure or delay on its part in performing any of its obligations or for any loss or damage, costs, charges and expenses incurred or suffered by the other party by reason of such failure or default or delay caused due to any force majeure conditions, acts of God, laws and regulations of the Government, strikes, lock-outs, riots, violence, war or any other cause beyond its control.

30. The parties hereby agree that this agreement as also the rights and obligations of the parties herein and in the joint co. shall be governed by the laws of India.

31. Any dispute or difference or claim arising out of or in relation to this agreement shall be referred to the Bengal Chamber of Commerce for settlement in accordance with the Arbitration and Conciliation Act 1996 and the Award of the Bengal Chamber of Commerce shall be final and binding on both the parties to this agreement.

In witness whereof the parties hereto have executed these presents on the day, month and year first above-written.

Signed, sealed and delivered by

Mr. ………………………………

pursuant to a Board Resolution

dated ……………… of Delco Ltd.,

at Calcutta in the presence of:                                 Signature

Signed, sealed and delivered by

Mr. …………………………………

pursuant to a Board Resolution

dated ……..… of Japan Co. Ltd.

Calcutta in the presence of:                                     Signature

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