SINO-GERMAN MODEL CONTRACT FOR KNOWHOW AND PATENT LICENSE

　　中国德国专利技术合同范本

　　CONTENTS 条款目录

　　Article 1 Definitions 定义

　　Article 2 Scope of the Contract 合同范围

　　Article 3 Contract Fees 合同费用

　　Article 4 Conditions of Payment 支付条款

　　Article 5 Delivery of the Technical Documentation 技术文件的交付

　　Article 6 Technical Service and Technical Training 技术服务与技术培训

　　Article 7 Tests and Acceptances 检测与验收

　　Article 8 Improvements and Grant-back 改进与回授

　　Article 9 Warranty and Liability 质量保证与责任

　　Article 10 Infringements 侵权的处理

　　Article 11 Confidentiality 保密

　　Article 12 Taxes and Duties 税收

　　Article 13 Force Majeure 不可抗力

　　Article 14 Termination 合同终止

　　Article 15 Governing Law and Arbitration 准据法与仲裁

　　Article 16 Quality – Marking 质量与标示

　　Article 17 Effectiveness of the Contract and Miscellaneous 合同生效与杂项约定

　　Article 18 Legal Addresses 各方地址

　　Annexes 附件

　　This Contract is made on ____ in____ between (Licensor) and _____ (Licensee)

　　Whereas Licensor possesses the Know-how, Patents and other related technical information relating to the licensed technology for designing, manufacturing and installing of _____.

　　Whereas Licensor has the right and agrees to grant a non-exclusive, non-transferable right and license to Licensee to use the Know-how and Patents as mentioned above;

　　Whereas Licensee wishes to obtain from Licensor the license and right to use Licensor’s Know-how and Patents for design, manufacturing and installing the Contract Products and as well as the right to sell the Contract Products, all as laid down in this Contract.

　　Now, therefore, the Parties agree as follows:

　　Article 1 Definitions (omitted)

　　Article 2 Scope of the Contract

　　2.1 Licensor has agreed to grant to Licensee and Licensee has agreed to obtain from Licensor the right to use the Know-how and the Contract Patents for the Contract Products as set out in Art. 2.2.

　　2.2 Licensor hereby grants to Licensee a non exclusive, non-transferable license to exploit the Know-how and the non-exclusive, non-transferable license to exploit Contract Patents for the design manufacture assembly installation and maintenance of the Contract Products in the Contract Factory as well as the right to sell the Contract Products so manufactured in the territory of China Germany and to export the Contract Products so manufactured in the following countries_____ regions _____. Licensee and Enduser is obliged not to sell or distribute Contract Products to buyer where he knows or should have known that the Contract Products will be exported to countries or regions other than referred to above.

　　Sales and distribution other than provided in this Art. 2.2 are subject to Licensors’s prior written consent.

　　2.3 Upon a separate written agreement concluded by the Parties, the Licensee shall have the right, to sublicense to a third Party inside or outside the licensed territory of

　　[ ] China

　　[ ] Germany

　　to exploit the Know how and/or the Contract Patents.

　　2.4 Licensor shall provide Licensee with the Technical Documentation. Its contents, quantity and time of delivery are detailed in Annex 2 to the Contract.

　　2.5 The Licensor shall be responsible to make available his technical personnel for rendering the Technical Training as defined in Annex 4 and the Technical Service as detailed in Annex 5.

　　2.6 Licensor is obliged to supply Licensee subject to separate agreement to be agreed upon from time to time with (components) required for the manufacture of the Contract Products.

　　Article 3 Contract Fees

　　[Option I: Lump-sum]

　　3.1 The total contract fee, which is a lump-sum to be paid by Licensee to Licensor for Know-how and Contract Patents, including Technical Documentation, Technical Training and Technical Service to be supplied by Licensor in accordance with the stipulation of Article 2 of this Contract, shall be _____ (say:____), which shall be calculated and paid in ____ currency and shall be valid for a quantity of up to ____ Contract Products based on which the total contract fee is calculated. If this quantity is exceeded, the Licensee shall pay an additional lump-sum on a pro rata basis, unless otherwise agreed upon.

　　3.2 The breakdown price of the above total contract fee shall be as follows:

　　3.3 The above mentioned total contract fee shall be firm and fixed and shall include delivery of the Technical Documentation as determined in Article 5.

　　[Option II: Initial fee and running royalty}

　　3.1 The fee to be paid by Licensee to Licensor for Know-how and Contract Patents, including Technical Documentation, Technical Training and Technical Service to be supplied by Licensor in accordance with the stipulation of Article 2 of this Contract, shall be priced on the combination of initial fee and running royalty, which shall be paid in ______ currency.

　　3.2 The above fee shall be calculated as follows:

　　a) Calculating base: Running Royalty shall be calculated on basis of the Net Selling Price of the Contract Products which are invoiced or dispatched or used by Licensee whichever is earlier. The Contract Products which have been returned shall be excluded, unless sold again.

　　3.3 Royalty under this Contract shall be calculated starting from the date on which Licensee starts sales or use, whichever is earlier, of Contract Products. The date of settling accounts for royalty shall be 31. December of each year in terms of calendar year on semi annual basis at the end of the respective period on an annual basis.

　　3.4 The statement of selling quantity, net selling amount of the Contract Products and royalty which Licensee should pay for last calendar year semi annual period, shall be submitted to Licensor in written form by Licensee within 30 (thirty) days after the date of settling accounts for the royalty. The specific methods for calculating net selling amount and royalty in detail such as _____ are listed in Annex 8 to this Contract.

　　[Option III: Running Royalty] Subject to detailed negotiations and agreement between the Parties

　　Article 4 Conditions of Payment

　　[Option I: Lump-sum]

　　4.1 All the payments stipulated in the Contract shall be effected in ____ (currency) by telegraphic transfer (T/T) mail transfer (M/T) through the Bank of _____ (here it is the business Bank of Licensee) and the Bank of _____ ( here it is the business Bank of Licensor). All the Banking charges incurred inside Licensee’s country shall be borne by Licensee, and all the banking charges incurred outside Licensee’s country shall be borne by Licensor.

　　4.2 The payment of total contract fee stipulated in Article 3 of the Contract shall be made by Licensee to Licensor according to the following manner:

　　4.2.1 ___ % (__percent) of the total contract fee, namely ___ (say: ____) shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by Licensor in conformity with the stipulations of the Contract.

　　(1) One photostat copy of a valid export license issued by the relevant authorities of Licensor or one copy of a written statement by the competent authorities of Licensor or by Licensor, certifying that the valid export licence is not required;

　　(2) One original of an irrevocable letter of guarantee (L/G) in favor of Licensee by _____ (Bank) for a sum of _____ (say:____). The specimen of the letter of guarantee is enclosed as Annex 6a to this Contract. The validity of the L/G shall expire at the delivery date of the Technical Documentation;

　　(3) Four copies of the proforma invoice concerning the total contract fee;

　　(4) Four copies of commercial invoice;

　　(5) Two copies of the sight draft

　　When making the above mentioned payment, Licensee shall submit to Licensor one original of the irrevocable letter of guarantee issued by the_____ Bank ____/China, for a sum of _____ (say:_____) (up to 70 % of the total contract fee) in favour of Licensor . The specimen of the letter of guarantee is enclosed as Annex 6b to the Contract.

　　4.2.2 ____% (______percent) of the total contract fee, namely ____ (say:____) shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by Licensor in conformity with the stipulations of the Contract:

　　(1) Four Copies of the commercial invoice

　　(2) Two copies of the sight draft

　　(3) Four copies of the airway bill for delivering the Technical Documentation (or the written notice confirming the Licensee’s receipt of Technical Documentation in case of Article 5.9).

　　4.2.3 _____ % of the total contract fee, namely _____ ( Say: ____) shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by the Licensor in conformity with the stipulations of the Contract:

　　(1) Four copies of the commercial invoice;

　　(2) Two copies of the sight draft

　　(3) Two copies of the letter of Licensor stating that the Licensor offered to start Technical Training.

　　4.2.4 _____ % of the total contract fee, namely ______ ( Say: ______) shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by Licensor in conformity with the stipulations of the Contract:

　　(1) Four copies of the commercial invoice;

　　(2) Two copies of the sight draft

　　(3) Two copies of the certificate signed by both parties stating that the Technical Training has been performed in accordance with Annex . However, such payment has to be made at the latest _____ months upon the date Licensor offered in writing to start the Technical Training in accordance with the Contract, unless Licensee can evidence that the non-performance of the Technical Training is due to Licensor’s reason.

　　4.2.5 ____ % of the total contract fee, namely _________ ( Say: ______) shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by Licensor in conformity with the stipulations of the Contract:

　　(1) Four copies of the commercial invoice:

　　(2) Two copies of the sight draft

　　(3) Two copies of the certificate signed by both parties stating that the Technical Service has been performed. However, such payment has to be made at the latest _____ months upon the date Technical Service was offered by Licensor, unless Licensee can evidence that the non-performance of the Technical service is due to Licensor’s reason.

　　4.2.6_____ % ( ____ percent) of the total contract fee, namely ______ ( Say: ______) shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by the Licensor in conformity with the stipulations of the Contract:

　　(1) Four copies of the commercial invoice:

　　(2) Two copies of the sight draft

　　(3) Two copies of the certificate signed by both Parties stating that the Acceptance Test has been performed in accordance with Annex 7. However, such payment has to be made at the latest ______ months upon the Date of Effectiveness of this Contract, unless Licensee can evidence that the non-issuance of the Acceptance Certificate is due to Licensor’s reason.

　　4.3 Licensee shall have the right to deduct, from any of the above-mentioned payments, the

　　penalties and/or compensation which (i) Licensor has separately acknowledged in writing to pay to Licensee or (ii) have been determined by arbitration award in accordance with the stipulations of the Contract, or (iii) become due because the delivery date as per 5.2 5.9 has not been met.

　　4.1 All the payments stipulated in the Contract shall be effected in ____ (currency) by telegraphic transfer (T/T) mail transfer (M/T) through the Bank of ____ (here it is the business Bank of Licensee) and the Bank of ____ (here it is the business Bank of Licensor). All the Banking charges incurred inside Licensee’s country shall be borne by Licensee and all the banking charges incurred outside Licensee’s country shall be borne by Licensor.

　　4.2 The initial fee stipulated in Article 3 of this Contract shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by Licensor which are in conformity with the stipulations of this Contract:

　　(1) One photostat copy of a valid export licence issued by the relevant authority of Licensor or one copy of a written statement by the competent authorities or by Licensor certifying that the valid export licence is not required;

　　(2) Four copies of the commercial invoice;

　　(3) Two copies of the sight draft

　　(4) One original of an irrevocable letter of guarantee (L/G) in favor of Licensee by _____ (Bank) for a sum of _____ (Say:____). The specimen of the letter of guarantee is listed in Annex 6a to this Contract. The validity of the L/G shall expire at delivery date of Technical Documentation.

　　4.3 The statement of actual selling quantity and Net Selling Price and total net selling amount of the Contract Products and royalty in the last calendar year semi annual annual period in accordance with Article 3.4 above shall be submitted by Licensee to Licensor within 30 (thirty) days after the date of settling accounts for royalty. Licensor shall send a confirmation to Licensee within 15 (fifteen) days after receiving the statement.

　　4.4 The running royalty shall be paid by Licensee to Licensor within 30 (thirty) days after Licensee has received the following documents provided by Licensor.

　　(1) Four copies of the commercial invoice;

　　In case the payment currency as defined in Art. 4.1 deviates from the currency in which the total net selling amount (the statement) is calculated, payment shall be made at the official exchange rate of the People’s Bank of China Europäische Zentralbank applicable at the date the payment is made.

　　4.5 Licensee shall keep a special register in which he shall record the actual selling quantity and Net Selling Price of Contract Products manufactured by virtue of the Contract and any other information relevant for determining the amount of royalties payable and shall make a statement to Licensor no later than 10 (ten) days after the date of settling account for royalty. Licensor shall be entitled to demand copies of invoices and other evidence which may be reasonably required to monitor the correctness of the royalty statements.

　　4.6 Licensor shall be entitled until 2 years after the due date of the last royalty statement under this Contract to audit, or have audited, at its own expense subject to the conditions hereunder, the records and the papers of Licensee that may be relevant and reasonably required for their examination in Licensee’s office or works during normal office hours. In case such audit results in any understatements by Licensee with the consequence of additional payments to Licensor, Licensee shall pay such additional moneys to Licensor within 30 days after the result of such audit has been submitted to Licensee plus interest. In addition thereto Licensee shall bear the costs of such audit provided the additional amount to be paid by Licensee to Licensor exceeds 3 %, 4 %, 5 % of the Royalties paid by Licensee to Licensor for the period audited.

　　If Licensor demands to audit accounts of Licensee, he shall notice Licensee within 10 (ten) days after receiving the statement issued by Licensee provided for in Article 4.3 or 4.5.

　　4.7 Licensee shall have the right to deduct, from any of the above-mentioned payments, the penalties and/or compensation which (i) Licensor has separately acknowledged in writing to pay to Licensee or (ii) have been determined by arbitration award in accordance with the stipulations of the Contract, or (iii) become due because the delivery date as per 5.2 5.9 has not been met.

　　Article 5 Delivery of the Technical Documentation

　　5.1 Subject to Licensee’s payment in accordance with Article ___ (Option I, 4.2.1; Option II, 4.2), Licensor shall deliver to Licensee the Technical Documentation (DDU INCOTERMS 2000) ______ airport in accordance with the contents, quantity and time as stipu-lated in Annex 2 to this Contract.

　　The Technical Documentation shall be in _____ (language) and based on metric system.

　　5.2 The date of delivery of the Technical Documentation shall be the date of the airway bill.

　　5.3 Licensor shall, at least 7 (seven) days before dispatching the Technical Documentation advise Licensee by telex or fax of the approximate number of parcels, approximate gross weight, Contract number and the expected arrival date at designated airport.

　　5.4 Licensor shall, within 24 (twenty-four) hours after dispatching each batch of the Technical Documentation, inform Licensee by telex or fax of the Contract number, airway bill number, airway bill date, documentation number, number of parcels. At the same time Licensor shall airmail by express to Licensee two copies of the airway bill and the detailed list of the Technical Documentation.

　　5.5 In case of any loss or damages caused to the Technical Documentation in course of the transportation to ______ airport, Licensee shall inform Licensor thereof immediately, but the latest within 14 (fourteen) Working Days after the date of delivery by Fax. Licensor shall dispatch free of charge to Licensee the missing part of the Technical Documentation and/or replace the damaged part of the Technical Documentation within shortest reasonable time but not later than _____ weeks after receipt of Licensee’s written notice, provided Licensee’s notice as above has been given in time as stipulated herein.

　　5.6 The Technical Documentation shall be packed in solid cases suitable for long distance transportation and numerous handlings with protective measures against moisture and rain.

　　5.7 The following contents shall be marked on the cover of each package of the Technical Documentation in English:

　　Larger packages shall be labelled as above on four adjacent sides.

　　5.8 There shall be two copies of the detailed list of the Technical Documentation marked with the order number, documentation code, name and pages inside each package.

　　5.9 Where the nature of Technical Documentation is such that it may be conveniently delivered directly by Licensor to Licensee by hand, Licensor shall advise Licensee in advance of its intention to deliver by this method and the anticipated date for its delivery by facsimile transmission. A specific form of written receipt shall be agreed between and signed by the Parties for deliveries made by this method. The date of delivery of the Technical Documentation shall be the date of such receipt.

　　Article 6 Technical Service and Technical Training

　　6.1 Licensor shall send his skilled, healthy and competent personnel to the Contract Factory to provide Technical Service on-site in accordance with the stipulations of the Contract. The number of person, their specialities, task content and duration of service in Licensee’s country are detailed in Annex 5 to this Contract.

　　6.2 Licensee shall with its best efforts assist Licensor’s technical personnel in obtaining necessary entry visa and/or other permits and shall provide to Licensor’s technical personnel accommodation as set out hereunder. The treatment conditions of Licensor’s technical personnel in Licensee’s country are detailed in Annex 5 to the Contract.

　　6.3 In case the technical personnel dispatched by Licensor are not able to finish the job described in Annex 5 to this Contract, Licensor shall replace the incompetent technical personnel at his own expense, until the stipulations in Annex 5 are fulfilled.

　　6.4 Licensor’s technical personnel shall abide by the laws and regulations of Licensee’s country and observe the rules of the Contract Factory during the period of services in Licensee’s country. Licensee shall take any measure to facilitate the rendering of Technical Service hereunder.

　　6.5 Licensor shall render Technical Training in accordance with this Contract. The nature of training, training program, the number of trainees, their qualification criteria and the number of Licensor’s instructors as well as the location of training and further details are set forth in Annex 4 to this Contract.

　　6.6 Licensor shall assist with his best efforts Licensee in obtaining necessary entry visa and/or other permits in Licensor’s country. The conditions for Licensee’s trainee personnel’s stay are set forth in Annex 4 to the Contract.

　　6.7 Licensee’s trainee personnel shall observe the law of Licensor’s country and the rules and regulations of Licensor’s factory in the period of training.

　　6.8 The scope of Technical Training as described in Annex 4 and of the Technical Service as described in Annex 5 and the remuneration thereof as agreed in Article 3.2 (c) and (d) in case of Option I or otherwise in this Contract or its Annexes may be decreased or increased by separate written agreement between the Parties, however, any extension of Technical Training and/or Technical Service is subject to availability of staff for such purposes.

　　Article 7 Tests and Acceptances

　　[Option I]

　　The Parties agree that no Acceptance Test shall be conducted, Articles 4.2.6, Article 7 and Article 9.9 therefore shall not apply

　　[Option II]

　　7.1 In order to verify that the Contract Products manufactured by Licensee by way of using the Know-how and Contract Patents are in conformity with the standard of acceptance according to Annex 7, a test and inspection of Contract Products shall jointly be carried out. The result of such Acceptance Tests shall be recorded and signed by the Parties. The specific procedure of tests, including beginning of the Acceptance Test and prerequisites to be fulfilled by Licensee and the standard of the Acceptance are set forth in detail in Annex 3 to this Contract.

　　7.2 If the standard of the acceptance specified in Annex 7 to the Contract are met in the said tests, both Parties’ authorized representatives shall sign four copies of the acceptance certificate of the Contract Products, two copies for each Party.

　　7.3 If the test demonstrates that the Contract Products are not in conformity with the standard of acceptance specified in Annex 7 to the Contract, both Parties shall friendly consult and jointly study and analyse the causes therefor and take the relevant measures to eliminate the defects of the Contract Products and carry out the second test within ____ days after the first test. If the second test demonstrates that the Contract Products meet the standard of the acceptance specified in Annex 7 to this Contract, both Parties’ authorized representatives shall sign the acceptance certificate of the Contract Products, two copies for each Party.

　　7.4 If the failure of the first Acceptance Test is due to Licensor’s responsibility, the Licensor shall send its technical personnel at its own cost, including man day service fees set out in Annex 5, to participate in the second test and shall bear all direct expenses related to the second test; if the failure of the first test is due to Licensee’s responsibility, all direct expenses related to the second test including but not limited to man day service fees of Licensor calculated at the rate as set out in Annex 5 shall be borne by Licensee.

　　If both Parties are responsible they then shall allocate the expenses by agreement for the second test in proportion to their relevant responsibility.

　　Failing such agreement within 4 (four) weeks upon failure of the first test, the second test shall be conducted according to Annex 7 upon request of either Party. Each Party shall bear its own costs related thereto on a preliminary basis. Final allocation of the expenses shall be negotiated at a later stage.

　　7.5 If the second Acceptance test is failed due to Licensor’s responsibility, the Licensor shall send its technical personnel at its own cost, including man day service fees set out in Annex 5, to participate in the third test and shall bear all the direct expenses related to the third test; if the failure of the second test is due to Licensee’s resibility, all direct expenses related to the third test including but not limited to man day service fees of Licensor calculated at the rate as set out in Annex 5 shall be borne by Licensee.

　　If both Parties are responsible they then shall allocate by agreement the expenses for the third test in proportion to their relevant responsibility. Failing such agreement within 4 (four) weeks upon failure of the second test, the third test shall be conducted according to Annex 7 upon request of either Party. Each Party shall bear its own costs related thereto on a preliminary basis. Final allocation of the expenses shall be negotiated at a later stage.

　　7.6 If the third test still fails or cannot be completed in ____ months from the beginning date of the Acceptance Test, then the Parties immediately shall enter into friendly negotiations on how to solve the problem and the Party being responsible for the failure or non-completion of said test shall be permitted to remedy the cause for such failure or non-completion. If neither the cause of the failure or non-completion of the test can be remedied by the relevant Party nor a settlement be achieved between the Parties within ____ days after the expiry of the above mentioned ____ months period, then Article 9.9 shall apply.

　　Article 8 Improvements and Grant-back

　　8.1 During the effectiveness of this Contract, the Party who made any development, modification and/or improvement of the Contract Products shall be the owner of such development, modification and/or improvement. Such Party may apply for any patent right for such development, modification and/or improvement, provided that the confidentiality obligations set out under Article 11 are observed.

　　8.2 Up to ____ years prior to the expiration of this Contract

　　During the term of this Contract each of the Parties shall notify the other Party in time of any modification and/or improvement of the Contract Products made by it or received by third parties in accordance with the last sentence of the following subparagraph of this Article 8.2 and introduced into its commercial production. Upon written request of each of the Parties to the other Party shall subject to separate agreement automatically supply and license the relevant know-how and/or Patents with regard to such modification and/or improvement of the Contract Products with charge free of charge.

　　Licensee shall use such information received from Licensor or developed by itself using the originally licensed Know-how and/or Contract Patents only in accordance with the provisions of this Contract. Licensor shall be entitled to use the information, which is dependent on the originally licensed Know-how and/or Contract Patents, and supplied by Licensee/enduser for purposes as it sees fit, i.e. Licensor shall be entitled to sublicense said information to third parties, provided such third party grants similar rights to Licensor for Contract Products for the benefit of Licensee.

　　Article 9 Warranty and Liability

　　9.1 Licensor warrants that Licensor is the legitimate owner or legal possessor of the Know-How and Contract Patents, and of the Technical Documentation supplied to Licensee in accordance with the Contract, and has the right to grant the license thereof.

　　9.2 Licensor warrants that the Know-how and Technical Documentation supplied to Licensee hereunder are in conformity with the stipulations of this Contract and are actually used in Licensor’s relevant factory at the time of signing of this Contract.

　　9.3 Licensor warrants that the Technical Documentation supplied by Licensor to Licensee hereunder is complete, correct, legible and shall be delivered in time as detailed in Annex 2 to this Contract.

　　a) Complete means that the Technical Documentation supplied by Licensor hereunder shall comprise all the technical documents for the Contract Products defined in Annex 2 to this Contract.

　　b) Correct means that the Technical Documentation to be supplied by Licensor hereunder shall be free of mistakes which might adversely affect the manufacture of Contract Products.

　　c) Legible means that the letters, lines, symbols etc. contained in the Technical Documentation can be visually taken from the relevant documents.

　　d) In time means that the Technical Documentation shall be dispatched according to the provisions set out in Article 5.1 5.9.

　　9.4 Licensor warrants that the Know-how and Technical Documentation supplied by Licensor are qualified for production of the Contract Products provided it is used in compliance with this Contract.

　　9.5 If the Technical Documentation supplied by Licensor hereunder is not complete and/or legible, Licensee shall inform Licensor thereof immediately in writing, latest within ____ weeks after the delivery date and Licensor shall immediately, latest within [ ] days upon Licensor’s receipt of Licensee’s information deliver to Licensee supplementary and/or revised Technical Documentation free of charge, if Licensee has given such notice to Licensor in time as stipulated herein.

　　If the Technical Documentation supplied by Licensor is not correct this Article 9.5 shall apply provided however that the immediate information of Licensee shall be given latest at the completion of Acceptance Test procedure.

　　9.6 [Option I] (In case of a lump-sum payment)

　　If the Licensor fails to deliver the Technical Documentation in time as stipulated in Annex 2 to the Contract and Article 9.5 above, Licensor shall pay penalty to Licensee for late delivery of the Technical Documentation at the following rates:

　　(1) ____ % of the total contract fee for each week of late delivery from the first week to the fourth week;

　　(2) ____ % of the total contract fee for each week of late delivery from the fifth week to the eighth week;

　　(3) ____ % of the total contract fee for each week of late delivery exceeding eight weeks.

　　The above-mentioned total penalty shall not exceed ____ % of the total contract fee,any fractional week of late delivery shall be counted as one week.

　　[Option II ] (In case of initial fee and running royalty)

　　If Licensor fails to deliver the Technical Documentation in time as stipulated in Annex 2 to the Contract and Art 9.5 above, Licensor shall pay penalty to Licensee for late delivery of the Technical Documentation as follows:

　　(1) ____ (say:____ ) [currency] for each week of late delivery from the first week to the fourth week;

　　(2) ____ (say:____ ) [currency] for each week of late delivery from the fifth week to the eighth week;

　　(3) ____ (say:_____) [currency] for each week of late delivery exceeding eight weeks.

　　The above-mentioned total penalty shall not exceed ____ [say] ____ [currency] . Any fractional week of late delivery shall be counted as one week.

　　9.7 Penalty made by Licensor to Licensee according to Article 9.6 above shall not release Licensor from its obligation to continue to deliver the Technical Documentation.

　　9.8 If the delivery of substantial parts of Licensor’s Technical Documen- tation is delayed over 6 (six) months, Licensee shall be entitled to terminate the Contract in accordance with Article 14.2 (1). Upon such termination Licensor shall return to Licensee the total amount which Licensee has already paid plus ____ % interest per annum thereon and pay liquidated damages amounting to _____ (say _____) (currency).

　　Article 7 and Article 9.9 not applicable

　　[Option II] The following shall apply together with Option II of Article 7

　　9.9.1 If due to reasons solely attributable to Licensor the third Acceptance Test is still failed or cannot be completed and the Parties cannot achieve a settlement or the cause of the failure cannot be remedied as provided in Article 7.6, the following shall apply:

　　i) If Licensee wishes to continue the use of the Know-how and Contract Patents, then Licensee within ____ weeks upon expiry of the ___ days period set out in Article 7.6 shall notify Licensor in writing of his decision to continue the use and exploitation of the Know-how and Contract Patents and, as sole compensation, Licensor shall pay direct damages of Licensee up to a maximum of ____; or the contract fee shall be devaluated by agreement between Parties according to the degree of failure to attain the contractual standards specified in Annex 3; or pay the liquidated damages amounting to _____ and the acceptance certificate shall be signed by both Parties.

　　ii) If Licensee decides to discontinue the use of the Know-how and Contract Patents, then Licensee within ___ weeks upon expiry of the ___ days period set out in Article 7.6 shall notify Licensor of termination of the Contract in writing. The date of termination shall be either the date of Licensee’s notification on termination of the Contract or the date of expiration of the _____ days period determined above under subparagraph i), whichever occurs earlier.

　　In such case Licensor shall return to Licensee the total amount of the contract fee which has already been paid by Licensee to Licensor. In addition, Licensee, as sole compensation, shall be entitled to the compensation of the direct damages up to a maximum of _____. Licensee shall return to Licensor the Technical Documentation and as of the date of termination discontinue to use the Know-how and Contract Patents.

　　(iii) If Licensee fails to notify Licensor within the above time period, Licensor shall request Licensee in writing to make the written notification within _____ days. If despite Licensor’s request Licensee does not notify Licensor accordingly within said ____ days period, then the Contract shall automatically terminate effective as of the expiry of said ____ days period. In such case the consequences of termination as set out under (ii) shall apply.

　　9.9.2 If due to reasons solely attributable to Licensee the third Acceptance Test failed and the Parties cannot achieve a settlement or the cause of the failure cannot be remedied as provided in Article 7.6 both Parties shall sign the acceptance certificate. Licensee shall pay all outstanding amounts of the contract fee and all direct expenses related to the third test including but not limited to man day service fees of Licensor calculated at the rate as set out in Annex 5. Licensor shall not be obliged to provide Licensee with modifications and improvements as set out in Article 8 hereof.

　　If due to reasons solely attributable to Licensee no Acceptance Test has been carried out within ___ months after the Date of Effectiveness of this Contract both Parties shall sign the acceptance certificate. Licensee shall pay all outstanding amounts of the Contract Fee and all direct expenses related to acceptance test if any, including but not limited to man day service fees of Licensor calculated at the rate as set out in Annex 5. Licensor shall not be obliged to provide Licensee with modifications and improvements as set out in Article 8 hereof.

　　9.9.3 If due to reasons attributable to both Parties the third Acceptance Test failed and the Parties cannot achieve a settlement or remedy the cause for such failure by reasonable joint efforts as provided in Article 7.6 or no Acceptance Test has been carried out within ________ months after the Date of Effectiveness of the Contract, both Parties shall negotiate how to solve the problems. If no solution has been achieved within ____ months either Party has the right to terminate this Contract, such termination right to be exercised within ____ weeks after the expiry of the above ____ months negotiating period. In case no Party terminates the Contract within said ____ weeks period set out above, Licensee is not entitled to further use the Know-how and Contract Patents, unless the Parties have reached an agreement on the payment terms of Article 4.2.6.

　　9.10 The obligations, warranties and liabilities assumed by the Parties under this Contract are limited to those expressly specified in this Contract. The Parties shall not be liable to any special, indirect or consequential damages or losses, such as but not limited to loss of revenue, loss of use, loss of production or capital costs, except in cases of gross negligence or wilful misconduct.

　　Article 10 Infringements

　　10.1.1 Licensor declares that at the date of signing this Contract no infringement claims in respect of the Contract Products have been reported to Licensor.

　　10.1.2 In case Licensee is accused for the infringement of proprietary rights of third parties in the licensed territory of China Germany and the following countries _____ because of the manufacture, sale or use of Licensor-designed Contract Products manufactured by Licensee in accordance with the Technical Documentation, Licensee after receipt of any respective notice shall inform Licensor immediately and Licensor and Licensee shall exercise their best efforts to defend against any such accusation and shall work closely together to avoid any infringement suit, e.g. by identifying non-infringing technical solutions.

　　Note: Licensor’s liabilities and limitations thereof as well as indemnification of Licensee in respect of infringement shall be agreed by the Parties according to the governing law of this Contract as well as the relevant international practices

　　Example 1: If the infringement charged by the third party is proven all economic losses Licensee may suffer shall be compensated by Licensor up to a maximum amount equivalent to ___ % of the royalty amount/contract fee paid by Licensee to Licensor according to Article 3 for the related Contract Product.

　　Example 2: If the infringement charged by the third party is proven all economic losses Licensee may suffer shall be compensated by Licensor in accordance with this Contract. However, in case Licensee is accused for the infringement of proprietary rights published after the date of signing this Contract, costs for appropriate measures as set out in Articles 10.1.2 and 10.1.3. and losses shall be equally shared by the Parties.

　　10.1.3 In case of proven infringement Licensee shall follow Licensor’s instructions, if any, to change the design or manufacturing process in order no longer to cause any such infringement.

　　10.2 In the event that Licensee finds any illegal exploitation of the Know-how, Contract Patents and other licensed technology by a third party in the licensed territory, Licensee shall without delay inform Licensor of the illegal acts by the third party. Licensor will at its own discretion decide on appropriate action to stop the illegal use by the third party including but not limited to initiation of court proceedings against such illegal user. In case Licensor decides to take action Licensee shall give any necessary assistance to Licensor. If Licensor does not take any action, subject to Licensor’s consent and written authorization Licensee may take action against illegal user at its own expense; such consent shall not unreasonably be withheld by Licensor.

　　Article 11 Confidentiality

　　11.1 Unless otherwise provided in this Contract each Signatory to this Contract hereby undertakes to the other:

　　(1) to keep confidential all technical or commercial information of a confidential nature or declared by the respective Party as being confidential including but not limited to the Know-how that it shall have obtained or received from the other Party or the Enduser before or during the term of this Contract;

　　(2) not without the other Party’s written consent to disclose such information in whole or in part to any third party and subject to such consent the third party shall be bound by the same confidentiality provisions;

　　(3) to use the information solely in connection with the implementation of this Contract and in no other way for its own benefit or the benefit of any third party;

　　(4) to impose corresponding confidentiality obligations in writing upon its employees and to take actions in case of breach thereof.

　　11.2 The provision of Article 11.1. shall not apply to any information which:

　　(1) is or later comes into the public domain otherwise than by breach of this Contract or any other agreements between the Parties;

　　(2) is independently received from a third party who is free from any obligations not to disclose it;

　　(3) is demonstrably conceived by one Party independently of the information received or acquired from the other Party; or

　　(4) the receiving Party is bound by applicable laws or regulations to disclose (disclosure is only admissible to the extent legally required).

　　11.3 Irrespective of any termination, each Party shall undertake the confidentiality obligations to the other for the term of this Contract pursuant to Article 17.3 and ___ years thereafter and the confidentiality period for modifications, improvements and developments shall be ____ years commencing from the date of disclosure to the other Party.

　　Article 12 Taxes and Duties

　　12.1 All the taxes and duties in connection with and in the execution of the Contract to be levied by the Government of Licensee’s country on Licensee under the laws in said country shall be paid by Licensee.

　　12.2 All the taxes and duties in connection with and in the execution of the Contract to be levied by the Government of Licensee’s country on Licensor under the laws in said country, unless exempted by the competent authorities, shall be paid by Licensor.

　　12.3 In case Licensor is legally required to bear taxes for payments of Licensee to Licensor under this Contract according to mandatory tax law of Licensee’s country and/or the Agreement on the Avoidance of Double Taxation between the People’s Republic of China and Germany Licensee shall have the right to withhold from the payments to Licensor such taxes for remittance to the tax authority in Licensee’s country on behalf of Licensor if Licensee presents to Licensor official tax receipts therefor .

　　Article 13 Force Majeure

　　Neither Party shall be held responsible for failure or delay to perform all or any part of this Contract due to flood, fire, earthquake, snowstorm, drought, hailstorm, hurricane, or any other events that are beyond the control of the affected Party and could not reasonably be expected at the time of conclusion of this Contract or have could been avoided or overcome by such Party. However, the Party who’s performance is affected by the event of Force Majeure shall give a notice to the other Party of its occurrence as soon as possible and a certificate or a document of the occurrence of the Force Majeure event issued by the relative authority or a neutral independent third party shall be sent by the other party not later than ___ days after its occurrence.

　　If the event of Force Majeure continues for more than 120 days, both Parties shall negotiate the performance or the termination of this Contract. If within 180 days after the occurrence of the event of Force Majeure both Parties cannot reach an agreement, either Party has the right to terminate this Contract in accordance with Article 14 hereof. In case of such a termination either Party shall bear its own costs, further claims for compensation resulting from the termination shall be excluded.

　　Article 14 Termination

　　14.1 Except as provided elsewhere, this Contract may be terminated in either of the following cases:

　　(1) Through mutual written agreement by both Parties; or

　　(2) in accordance with Article 14.2

　　14.2 Either Party may terminate this Contract by notice in writing with immediate effect,

　　(1) if the other Party for reasons solely within its responsibility seriously fails to perform its obligations within the time limit agreed upon in this Contract and fails to eliminate or remedy such breach within ( ) days after the receipt of the written notice thereof from the non-breaching Party. In such case the non-breaching Party shall give a written notice to the other Party to terminate this Contract;

　　(2) if the other Party becomes bankrupt, or is the subject of proceedings for liquidation or dissolution or ceases or is unable to carry on its business;

　　(3) if there is a change in Licensee’s ownership or control of assets (in this case only the Licensor may terminate);

　　(4) if a legal successor of Licensor refuses to assume the obligation of Licensor under this Contract (in this case only Licensee may terminate);

　　(5) if there is an event of Force Majeure continuing for more than 120 days and the parties cannot reach an agreement as set out in Article 13.

　　14.3 Termination does not affect any right or claims of the terminating Party including but not limited to its right to claim compensation in accordance with the stipulations of this Contract for damages result- ing from termination.

　　14.4 In case of any termination of this Contract, Licensee shall discontinue the use of the Know-how and Contract Patents.

　　Article 15 Governing Law and Arbitration

　　15.1 The governing law of this Contract is the laws of Licensor’s Licensee’s country _____ (other jurisdiction).

　　15.2 All disputes arising out of or in connection with this Contract including any question regarding its existence, validity or termination, shall be finally settled by arbitration to the exclusion of the regular courts being competent for a decision in respect of the dispute.

　　15.3 The case shall be submitted for arbitration to China International Economic and Trade Arbitration Commission, arbitration shall be held in _____, P.R. China.

　　The German Institution for Arbitration, arbitration proceedings shall be held in ______, Germany.

　　______ (other international arbitration institute agreed by both parties such as the ICC - International Court of Arbitration Paris or the Arbitration Institute of the Zurich Chamber of Commerce or Hong Kong International Arbitration Center.)

　　The arbitration shall be conducted in accordance with the procedural rules of _____.

　　15.4 The arbitration procedures shall be conducted in English language and the arbitrators shall refer to the English version of the Contract.

　　15.5 Arbitration awards shall be final and binding upon both Parties.

　　15.6 In the course of settling disputes, the Contract shall be continuously executed by both parties except for the part which is under arbitration.

　　Article 16 Quality - Marking

　　The Licensee in manufacturing the Contract Products shall comply with the Licensor’s quality specification.

　　Licensee shall provide Contract Products manufactured under this Contract with its own name and/or trademark. Any use of Licensor’s name, trademark or labelling shall be subject to a separate agreement between the Parties including agreement on quality control procedures.

　　Article 17 Effectiveness of the Contract and Miscellaneous

　　17.1 This Contract is signed by the authorized representatives of both Parties on ___ in _____ (city). Both Parties shall file applications with their respective government for approval of the Contract if such approval is required by mandatory law. The Date of Effectiveness shall be the date of approval if such approval is required by law, otherwise the date of signing the date of registration of the Contract. Both Parties shall do their utmost to obtain the approval within 60 (sixty) days, and shall advise the other Party by Fax and send a letter for confirmation.

　　17.2 If the Contract cannot come into force within ___ months after the date of signing the Contract, both Parties shall have the right to cancel the Contract.

　　17.3 The Contract shall be in force for ______ years from the Date of Effectiveness of the Contract. After the expiration of this term of validity, the Contract shall automatically become null and void. However, the Parties may negotiate the continuous use of the Know-how and Contract Patents according to fair and reasonable principles.

　　17.4 The outstanding rights and obligations between both Parties at the expiration of the Contract shall not be affected by the expiration of the Contract.

　　17.5 This Contract is done in English in four originals, two for each Party.

　　17.6 The Contract is formed by Article 1 to Article 18 and Annex 1 to Annex ___, the text and Annexes of the Contract shall be integral parts of the Contract and have the same legal force.

　　17.7 Any heading of the Articles used in this Contract are given for ease of reference only and shall not affect the interpretation or construction of this Contract.

　　17.8 Any changes, amendments, supplements and subtractions to the stipulations of the Contract shall be valid after both Parties’ authorized representatives have signed written documents which shall form integral part of the Contract and shall have the same legal force as the Contract or in case of the requirement of any statutory approval upon issuance of such approval.

　　17.9 In the course of implementation of the Contract, all the communications between both Parties shall be in English. Notices shall be in written form.

　　17.10 Notices shall be made by the Parties to the legal addresses specified in Article 18, unless otherwise determined in writing by the Parties.

　　17.11 The invalidity of any provision of this Contract shall not affect the validity of any other provision of this Contract or the Contract. The Parties agree to replace such invalid provision by one that is valid and complies with the Parties’ business intentions at the time of signing this Contract.

　　17.12 Licensee only with the prior written consent of Licensor may assign in whole or in part any rights derived under this Contract.

　　Article 18 Legal Addresses

　　18.1 Licensor _______

　　18.2 Licensee: _______

　　18.3 Signature of both parties’ authorized representatives:

　　Licensor Licensee

　　(signature) (signature) (signature)

　　Annexes:

　　The following list ofAnnexes shall be inserted at the end:

　　List of Annexes (Proposal)

　　Annex 1 Project Description, Parties, Location, Contract Products

　　Annex 2 List and Contents of Technical Documentation/List of Contract Patents/Delivery Schedule of Technical Documentation

　　Annex 3 Specification of Contract Products, Standard of Quality, Details and Regulations, Technical Indices, Manufacturing Details

　　Annex 4 The Contents, Requirements, Schedules and Conditions of Technical Training

　　Annex 5 The Contents, Requirements, Schedules and Conditions of Technical Service

　　Annex 6 a Specimen of Down Payment Guarantee by Licensor

　　Annex 6 b Specimen of Letter of Guarantee by Licensee

　　Annex 7 Standards of Acceptance

　　Annex 8 Measures of Calculation of Royalties

　　And/or other Annexes to be agreed by both Parties