EXHIBIT 10(xxxi)
================================================================================
SINO-FOREIGN EQUITY JOINT VENTURE CONTRACT
FOR
RONGCHENG CHENGSHAN STEEL CORD COMPANY LTD
BY AND BETWEEN
CHENGSHAN GROUP COMPANY LIMITED
AND
CTB (BARBADOS) INVESTMENT CO. LTD.
================================================================================
OCTOBER 27, 2005
TABLE OF CONTENTS
CHAPTER PAGE
- ------- ----
CHAPTER 1 DEFINITIONS............................................... 01
CHAPTER 2 PARTIES TO THE CONTRACT................................... 01
CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE........................ 02
CHAPTER 4 PURPOSE AND BUSINESS SCOPE OF THE JOINT VENTURE........... 03
CHAPTER 5 TOTAL INVESTMENT AND REGISTERED CAPITAL................... 03
CHAPTER 6 REPRESENTATIONS AND WARRANTIES............................ 05
CHAPTER 7 RESPONSIBILITIES OF THE PARTIES........................... 06
CHAPTER 8 BOARD OF DIRECTORS........................................ 08
CHAPTER 9 OPERATION AND MANAGEMENT.................................. 11
CHAPTER 10 LABOR MANAGEMENT.......................................... 13
CHAPTER 11 FINANCIAL AFFAIRS AND ACCOUNTING.......................... 14
CHAPTER 12 PROFIT DISTRIBUTION....................................... 15
CHAPTER 13 TAXATION AND INSURANCE.................................... 16
CHAPTER 14 PURCHASE OF MATERIALS AND SALE OF PRODUCTS................ 16
CHAPTER 15 CONFIDENTIALITY AND NON-COMPETE........................... 16
CHAPTER 16 DURATION, TERMINATION AND LIQUIDATION..................... 18
CHAPTER 17 BREACH OF CONTRACT........................................ 22
CHAPTER 18 FORCE MAJEURE............................................. 22
CHAPTER 19 DISPUTE RESOLUTION........................................ 23
CHAPTER 20 GOVERNING LAW & CHANGE OF LAW............................. 24
CHAPTER 21 EFFECTIVE DATE OF THE CONTRACT............................ 24
CHAPTER 22 MISCELLANEOUS PROVISIONS.................................. 24
APPENDIX 1 DEFINITIONS AND INTERPRETATION............................ 28
APPENDIX 2 EQUITY TRANSFER/PLEDGE RULES.............................. 32
APPENDIX 3 SHARE PURCHASE AGREEMENT 35
EQUITY JOINT VENTURE CONTRACT
This Sino-foreign Equity Joint Venture Contract (this "CONTRACT") is made and
entered into in the People's Republic of China ("CHINA" or "PRC") on this 27th.
day of October, 2005, in accordance with the PRC Sino-foreign Equity Joint
Venture Law (the "JOINT VENTURE Law") and other relevant PRC laws and
regulations, by and among:
(1) CHENGSHAN GROUP COMPANY LTD., a limited liabilities company duly organized
and existing under the laws of the PRC with its legal address at No 98,
North Nan Shan Road, Rongcheng City, Shandong Province, PRC ("PARTY A");
and
(2) CTB (BARBADOS) INVESTMENT CO. LTD., a company duly organized and existing
under the laws of [Barbados] with its legal address at Chancery House,
High Street, Bridgetown, Barbados, W. I. ("PARTY B").
(Each party is hereinafter individually referred to as a "PARTY" and
collectively as the "PARTIES".)
WHEREAS:
(A) On the date of this Contract, Party A and Mr. Teng Liu-zhi [CHINESE
CHARACTERS] ("MR. TENG") are the existing shareholders of Rongcheng
Chengshan Steel Cord Co., Ltd. (the "COMPANY"), a limited liability
company duly organized and existing under the laws of the PRC;
(B) Party A will purchase from Mr. Teng, and Mr. Teng has agreed to sell to
Party A, the Company's equity interests owned by Mr. Teng. Therefore,
Party A will own all the equity interests of the Company prior to the
Completion Date (as such term defined in the Share Purchase Agreement);
(C) Party A has agreed to sell to Party B, and Party B has agreed to purchase
from Party A, a portion of twenty five percent (25%) of the equity
interest of the Company in accordance with the terms and conditions of the
Share Purchase Agreement entered into among Party A, Party B and the
Company on the date of this Contract; and
(D) In accordance with the principles of equality and mutual benefit, the
Parties have held friendly negotiations in relation to the terms and
conditions for converting the Company from a domestic limited liability
company into a Sino-foreign equity joint venture.
NOW, THEREFORE, the Parties hereby agree as follows:
CHAPTER 1 DEFINITIONS
Unless the terms or context of this Contract provide otherwise, capitalized
terms used herein without definition have the meanings assigned to them in
Appendix 1 attached to this Contract.
CHAPTER 2 PARTIES TO THE CONTRACT
2.1 The Parties. The Parties to this Contract are as follows:
1
(1) Party A: Chengshan Group Company Ltd.
Country of Registration: PRC
Legal Address: No. 98, Nanshan Road North, Rongcheng
City, Shandong Province, PRC
Current Legal Representative: Che Hong-Zhi
Nationality: Chinese
(2) Party B: CTB (BARBADOS) INVESTMENT CO. LTD.
Country of Registration: Barbados
Legal Address: Chancery House, High Street,
Bridgetown, Barbados, W. I.
Current Legal Representative: Harold C. Miller
Nationality: U.S.A.
CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE
3.1 Establishment of the Joint Venture. In accordance with the Joint Venture
Law and other relevant PRC laws and regulations, the Parties hereby enter
into this Contract for the establishment of the Joint Venture as a
Sino-foreign equity joint venture in the form of a limited liability
company.
3.2 Joint Venture Name, Legal Address.
(1) The name of the Joint Venture in English is "Rongcheng Chengshan
Steel Cord Company Ltd."
The name of the Joint Venture in Chinese is [CHINESE CHARACTER]
(2) The legal address of the Joint Venture is Chengshan Road, Rongcheng
City, Shandong Province, PRC.
3.3 Limited Liability Company. The Joint Venture shall be organized as a
company with limited liability under PRC law, liable for its own debts
with its own assets. The liability of each Party shall be limited to the
amount of the Registered Capital expressly subscribed by such Party. No
Party shall be obligated at any time to provide any funds to, or on behalf
of, the Joint Venture by way of capital contribution, loan, advance,
guarantee or otherwise, except as specifically provided in this Contract,
or as otherwise agreed to in writing by the Parties. The Parties shall not
be liable for the debts of the Joint Venture, unless otherwise
specifically agreed in writing between a particular creditor and the Party
or Parties concerned. Subject to the terms and conditions of this
Contract, the profits, risks and losses of the Joint Venture shall be
shared by the Parties in proportion to their respective contributions to
the Registered Capital.
2
3.4 PRC Law. The activities of the Joint Venture shall be governed by, and its
legal rights and operational autonomy shall be protected in accordance
with, the laws and regulations of the PRC.
CHAPTER 4 PURPOSE AND BUSINESS SCOPE OF THE JOINT VENTURE
4.1 Purpose of Joint Venture. The purpose of the Joint Venture is to use
advanced technology and management methods to develop, manufacture and
sell the Products on the international and domestic markets and to earn a
satisfactory return on investment for the Parties.
4.2 Scope of Business. The Joint Venture's scope of business shall be to
design, develop, manufacture, and process (consuming both domestic and
imported materials) steel cords and tire bead wires; provide technical
support and after sales service for such products; and market and sell
such products.
CHAPTER 5 REGISTERED CAPITAL
5.1 Registered Capital. The Registered Capital of the Joint Venture shall be
Renminbi one hundred and thirty million (RMB(Y)130,000,000).
5.2 Schedule for Capital Contributions. For avoidance of doubt, the Parties
hereby agree that (i) conversion of the Party A's equity interest of the
Company into its Percentage Interest in the Registered Capital of the
Joint Venture on the Establishment Date; and (ii) completion of Party B's
payment of the Transaction Price (as such term defined in the Share
Purchase Agreement) pursuant to the payment schedule stipulated in Article
3.1 under the Share Purchase Agreement shall be deemed as completion of
capital contribution of the Parties to the Joint Venture.
5.3 Conditions Precedent to the Contribution of Registered Capital.
The Parties' contribution to the Registered Capital of the Joint Venture
pursuant to Article 5.2 hereof shall be conditioned on the satisfaction of
all of the following:
(1) Party A has acquired all the equity interests of the Company;
(2) the Examination and Approval Authority has issued a Certificate of
Approval, and any required changes to this Contract have been agreed
to in writing by the Parties;
(3) a Business License has been granted to the Joint Venture which
authorizes the full scope of business of the Joint Venture described
in Article 4.2 or any required changes thereto have been agreed to
in writing by the Parties; and
(4) all Parties have obtained corporate approvals in respect of this
Contract from their respective board of directors as may be
necessary.
3
5.4 Capital Contribution Verification and Certificate. An accountant
registered in the PRC shall be engaged by the Joint Venture to verify the
respective capital contributions of each Party and provide a capital
verification report(s) accordingly. The Joint Venture, upon the receipt of
a satisfactory capital verification report, shall issue a capital
contribution certificate to the relevant Party. This certificate shall
include the following items: name of the Joint Venture; the Establishment
Date; the names of the Parties and the amount of their respective capital
contributions; the date on which the capital contributions were made; and
the date of issuance of the capital contribution certificate. Each capital
contribution certificate shall be signed by the Chairman and the
Vice-Chairman of the Joint Venture. The capital contribution certificates
shall only certify the investment of each Party and shall not be deemed as
a note or other negotiable instrument.
5.5 Financing. Subject to the terms and conditions of this Contract, to the
greatest extent permitted by relevant law, the Joint Venture may finance
its operations and capital needs by way of loans, including but not
limited to shareholder loans, loans from such banks, other financial
institutions or qualified lenders inside or outside of China and upon such
terms and subject to such conditions as may be approved by the Board.
Party A hereby undertakes to appropriately support, and to the extent
necessary, provide a loan at an amount of US$ 6,400,000 to the Joint
Venture as soon as practicable upon the Completion (as such term defined
in the Share Purchase Agreement), which shall have a term of at least 10
years bearing interest at the prevailing market rate and will be
subordinated to the claims against and liabilities incurred by the Joint
Venture.
5.6 Increase of Registered Capital. The Registered Capital of the Joint
Venture may be increased by a unanimous resolution of the Board, which
resolution shall stipulate the timing and other terms of such increase,
with such increase subject to the approval of the Examination and Approval
Authority and registration with the Registration Authority. If any Party
chooses not to participate in any such additional investment in the Joint
Venture, the other Party shall have the option to make the additional
contribution to the Joint Venture's Registered Capital and the ownership
percentages of the Parties' equity interests in the Joint Venture shall be
adjusted accordingly.
5.7 Transfer of Equity Interests.
(1) If one Party wishes to transfer all or part of its Percentage
Interest in the Joint Venture to any third party, it shall obtain
the written consent of (including waiver of preemptive rights by)
the other Party, and the transfer shall be presented to the
Examination and Approval Authority for approval. The Party agree to
be bound by the detailed rules set forth in Appendix 2 attached to
this Contract, which rules are to implement the principle described
in the preceding sentence.
5.8 Share Purchase. On the date of this Contract, Party A and Party B shall
enter into a share purchase agreement (the "SHARE PURCHASE AGREEMENT") in
substantially the form attached as Appendix 3 hereto, pursuant to which
Party A has agreed to sell to Party B, and Party B has agreed to purchase
from Party A, twenty five percent (25%) of the equity interest of the
Company in accordance with the terms and conditions therein.
4
CHAPTER 6 REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties. Each Party hereby represents and warrants
that, as of the date of this Contract and as of a date on which a Party
makes a capital contribution to the Joint Venture in accordance with
Article 5.2 herein, it:
(1) has the capacity and authority to enter into this Contract and to
perform its obligations hereunder, and is duly organized and validly
existing under the laws of the PRC in the case of Party A, and under
the laws of Barbados in the case of Party B;
(2) is not a party to, bound by or subject to any contract, instrument,
charter or by-law provision, statute, regulation, order, judgment,
decree or law which would be violated, contravened or breached by,
or under which any default would occur as a result of, the execution
and delivery by such Party of this Contract or the performance by
such Party of any of the terms of this Contract, or which restricts
such Party from entering into this Contract or performing its
obligations and abiding by the terms hereunder;
(3) has duly authorized, executed and delivered this Contract and that
this Contract constitutes a legal, valid and binding obligation
enforceable in accordance with its terms;
(4) will contribute capital or transfer shares in a manner which does
not conflict with, violate or result in a breach of, any of the
terms, conditions or provisions of any law, regulation, order, writ,
injunction, decree, determination or award of any court,
governmental department, board, agency or instrumentality or any
arbitrator, or result in the creation or imposition of any lien,
charge, security interest or encumbrance of any nature whatsoever
upon such capital or shares;
(5) freely enters into this Contract and has not and will not hereafter
incur any obligations or commitments of any kind which would in any
way hinder or interfere with its acceptance or performance of its
obligations hereunder; and
(6) (i) has carefully read the entire Contract including the Appendices
hereto; (ii) fully understands all of the terms, conditions,
restrictions and provisions set forth in this Contract, (iii) agrees
that the terms, conditions, restrictions and provisions herein are
necessary for the reasonable and proper protection of the business
of the Joint Venture and the other Party, and (iv) acknowledges that
each such term, condition, restriction and provision is fair and
reasonable with respect to the subject matter thereof.
6.2 Representations and Warranties in Respect of the Company's Equity
Interest. In respect of the Company's equity interest relating to the
share purchase specified in Article 5.8 hereof, Party A represents,
warrants and undertakes to Party B, as of the date of this Contract and as
of the Completion Date (as such term defined in the Share Purchase
Agreement), those representations, warranties and undertakings set forth
in the Share Purchase Agreement are true, accurate and complete.
6.3 Cure and Indemnification Obligations.
5
(1) In case of any breach of the Contract by any Party, it shall, in
accordance with the direction of the non-breaching Party within
thirty (30) days after receiving a notice of the non-breaching Party
concerning any breach, take all necessary actions to cure such
breach.
(2) Each Party agrees to indemnify and hold the other Party and the
Joint Venture harmless from and against any and all claims, losses,
damages, and costs arising out of any of its breach of any of its
covenants or representations and warranties contained herein, .
CHAPTER 7 RESPONSIBILITIES OF THE PARTIES
7.1 Party A's Responsibilities. In addition to its other obligations under
this Contract, Party A shall be responsible for the following matters:
(1) Providing capital contributions in accordance with the terms and
conditions of this Contract;
(2) Using its best endeavors (acting at all times in close consultation
with Party B) to assist the Joint Venture to:
(a) obtain all necessary governmental approvals and completing all
required registrations for the establishment and operation of
the Joint Venture;
(b) liaise with PRC national, provincial, municipal or local
governmental authorities and other relevant institutions or
organizations;
(c) obtain the most preferential tax, customs, foreign exchange
and other favorable treatment that are or may become available
to the Joint Venture and/or the Parties under relevant
national and local laws and regulations of the PRC; and
(d) procure necessary equipment, materials, articles for office
use, means of transportation, telecommunications facilities
and other public utilities, in accordance with the Joint
Venture's request.
(3) Using its best endeavors (acting at all times in close consultation
with Party B) to assist the Joint Venture to register with the
relevant tax bureau, to open such foreign exchange and RMB bank
accounts, assist the Joint Venture with all required foreign
exchange approvals, and assist the Joint Venture in applying for all
approvals required to remit to Party B in foreign exchange
distributable profits and all other payments required to be paid to
Party B;
(4) Providing necessary assistance to the Joint Venture in recruiting
suitable management personnel, technical personnel and other
necessary employees to be employed by the Joint Venture;
(5) Assisting the Joint Venture to contact banks and other financial
institutions inside the PRC and hold discussions with them with
respect to the raising of any loans required by the Joint Venture;
6
(6) Assisting foreign workers, staff, and personnel (including
Directors, managers, technicians, and contractors appointed or
selected by Party B) in obtaining PRC visas and work permits for
travel to China directly related to the operation of the Joint
Venture if requested by Party B;
(7) Be responsible for any environmental pollution, fines, charges or
losses caused by it prior to the Establishment Date, and indemnify
the Joint Venture for any financial burden and/or losses arising out
of any contamination caused by it prior to the Establishment Date;
(8) Providing a shareholder loan to the Joint Venture according to
Article 5.5 herein; and
(9) Assisting with and carrying out other relevant matters as may be
reasonably requested by the Board from time to time.
7.2 Responsibilities of Party B. In addition to its other obligations under
this Contract, Party B and shall be responsible for the following matters:
(1) Providing capital contributions in accordance with the terms and
conditions of this Contract;
(2) Providing any necessary assistance to the Joint Venture's
recruitment of suitable expatriate management personnel, technical
personnel and other necessary expatriate employees to be employed by
the Joint Venture on the basis of merit;
(3) Assisting the Joint Venture to contact banks and other financial
institutions outside of the PRC and hold discussions with them with
respect to the raising of any foreign exchange loans required by the
Joint Venture;
(4) Assisting the Joint Venture in training key staff and employees;
(5) Seconding relevant management personnel, technical personnel and
other necessary staff to work for the Joint Venture as per the Joint
Venture's request; and
(6) Assisting with and carrying out other relevant matters requested by
the Joint Venture from time to time.
7.3 Related Party Transactions. The Parties shall procure that all related
party transactions with respect to the Joint Venture shall be transparent
to the Parties and be conducted on an arm's length basis, provided
however, it is the intention of the Parties that if the price, quality and
delivery of the Products meet the requirements of the Tire JVs, the Tire
JVs will purchase from the Joint Venture. Any significant purchases
(including purchases of raw materials) by the Joint Venture from the
Parties or their Affiliates shall be approved by the Board in accordance
with Article 8.3 herein.
7
CHAPTER 8 BOARD OF DIRECTORS
8.1 Formation of the Board.
(1) The Board shall be the highest authority of the Joint Venture. It
shall discuss and determine all strategic business and financial
issues and operational issues of the Joint Venture in accordance
with the provisions of this Contract and the Articles of
Association.
(2) The Board shall consist of three (3) Directors, of which two (2)
shall be appointed by Party A and one (1) shall be appointed by
Party B. At the time this Contract is executed and when replacement
Directors are appointed, the Parties shall notify one another in
writing of the names and addresses of its appointees, together with
a brief curriculum vitae and a list of other official functions, if
any, that the relevant appointees will concurrently carry out for
the Joint Venture. Each Party shall cause the Directors appointed by
it to perform the obligations specified in this Contract and as
required under relevant PRC laws and regulations.
(3) Directors shall each be appointed for terms of four (4) years, and
may serve consecutive terms if reappointed by the Party originally
appointing such Director.
(4) Any Party may, at any time with or without cause, remove and replace
a Director that it has appointed by written notice to the Joint
Venture and to the other Party. If a seat on the Board is vacated
due to the retirement, resignation, illness, disability or death of
a Director or by the removal of such Director by the original
appointing Party, the Party which originally appointed such Director
shall appoint a successor to serve the remainder of such Director's
term.
(5) If either Party or the Board has reason to believe that a Director
has materially breached his/her duties as a Director (provided such
breach appear to be supported by reasonable grounds as determined by
a simple majority of the Directors), or has been convicted of
committing an act or omission constituting fraud, theft,
embezzlement or other violations of relevant PRC law, the Board may
remove the relevant Director immediately. Following any such
removal, the Party that originally appointed the relevant Director
shall appoint a successor to serve the remainder of such Director's
term.
8.2 Chairman and Vice Chairman of the Board.
(1) The Board shall have one (1) Chairman and one (1) Vice Chairman. A
Director appointed by Party A shall serve as Chairman of the Board,
and a Director appointed by Party B shall serve as Vice Chairman of
the Board.
(2) The Chairman of the Board shall be the sole legal representative of
the Joint Venture. The Chairman shall perform his or her duties and
responsibilities within the scope of authority delegated by the
Board, and in accordance with this Contract and relevant PRC laws.
Without prejudice to Article 8.1(4) above, when the Chairman is
temporarily unable to perform his or her responsibilities, he or she
may designate in writing the Vice Chairman or any other Director to
represent the Joint Venture in such capacity within such temporary
period.
8
8.3 Powers of the Board.
(1) Each Director shall have one vote on any matter subjected to Board
vote. Neither the Chairman nor the Vice-Chairman, in their capacity
as such, shall be entitled to have any extra vote in any meeting of
the Board. This provision is without prejudice to Article 8.4(6) on
proxies.
(2) The quorum necessary for a meeting of the Board shall be two thirds
(2/3) of the Directors. This requires at least two (2) Directors to
be in attendance for a quorum, with at least one Director appointed
by each Party at presence.
(3) The following matters require a decision by the Board supported by
the affirmative vote of all Directors present and eligible to vote
(or represented in accordance with Article 8.4(6) in a duly
constituted meeting of the Board or as per Article 8.4(9):
(a) any amendment of the Articles of Association;
(b) termination of this Contract;
(c) dissolution of the Joint Venture;
(d) increase or decrease of the Registered Capital of the Joint
Venture;
(e) amalgamation or merger of the Joint Venture with any other
company, association, partnership or legal entity;
(f) division or change in the form of legal organization of the
Joint Venture.;and
(g) annual capital expenditure budget.
(4) The Parties agree that all matters except those listed in Article
8.3(3) above can be decided by the Board supported by a simple
majority of Directors present and eligible to vote (or represented
in accordance with Article 8.4(6)) in a duly constituted meeting of
the Board or as per Article 8.4(9).
(5) The Board shall by resolution supported by a simple majority of
Directors formally authorize the General Manager and/or other
Persons with necessary powers to implement decisions of the Board in
accordance with this Contract, and, more generally, to conduct the
day-to-day business of the Joint Venture in accordance with the then
current business plan.
(6) The Board shall adopt rules and procedures regarding (a) provision
of guarantee or security by the Joint Venture to any Person, (b)
creation of any security interest on any property of the Joint
Venture, (c) custody of the Joint Venture's chops, and (d) such
other matters as the Board deems necessary.
8.4 Board Meetings.
9
(1) Board meetings shall be held at least twice a year. Meetings shall
be held at the registered address of the Joint Venture or such other
address in China or abroad as may be agreed by the Board. The first
Board meeting shall be held no later than sixty (60) days after the
Establishment Date.
(2) The agenda for Board meetings shall be determined by the Chairman of
the Board, but shall include in any event the items proposed by
other members of the Board.
(3) Board Meetings shall require prior written notice to all Directors
of not less than four (4) weeks (unless otherwise agreed unanimously
by all the Directors) setting forth the date, time, place and
agenda. Directors may waive their right to receive prior written
notice of any meeting.
(4) Upon the written notice of the Chairman of the Board or upon written
request of one third (1/3) or more of the Directors of the Joint
Venture specifying the matters to be discussed, the Chairman of the
Board shall within thirty (30) days convene an interim meeting of
the Board, provided that a quorum will be present for such an
interim meeting, whether in person or by proxy.
(5) The Chairman is responsible for convening and presiding over all
Board meetings. If the Chairman is unable to convene and/or preside
over a Board meeting, a Director designated in writing by the
Chairman shall convene and/or preside over such Board meeting.
(6) Board meetings may be attended by Directors in person, by telephone
or video conference, provided, however, that if a Director is unable
to participate in a Board meeting, he/she shall issue a written
proxy authorizing another Director or individual to attend the
meeting on his/her behalf. A Director or other individual so
entrusted shall have the same rights and powers as the Director who
issued the proxy.
(7) Board meetings shall be duly convened if a quorum is constituted in
attendance, in person or by proxy. In the event that the Directors
appointed by any Party fail to attend a Board meeting resulting in a
lack of a quorum, and such failure to attend is due to a dispute
between the Directors or Parties, such Party shall be deemed to be
in breach of this Contract, and Article 17 will become applicable.
(8) For the purpose of this clause, if a written resolution is executed
in identical counterparts, such signed counterparts shall together
be deemed to constitute a single resolution, effective on the day
the last Director signs the relevant counterpart.
(9) Notwithstanding any other provisions herein, Board resolutions may
be adopted by written consent by the Board in lieu of a meeting if
the relevant resolutions are sent to all Directors and the
resolutions are affirmatively signed and adopted by the number of
Directors necessary to make such a decision as stipulated in Article
8.3 above. Such written Board resolutions may consist of several
counterparts in identical form each signed by one or more of the
Directors. Such written Board re
10
solutions shall be filed with the Board meeting minutes and shall
have the same force and effect as a Board resolution adopted at a
duly constituted and convened Board meeting.
(10) Board meetings shall be held in English and Chinese and all Board
minutes and Board resolutions and agendas and other Board meeting
documents shall be prepared and provided in both English and
Chinese. The Chairman shall cause complete and accurate minutes (in
English and Chinese versions) to be kept of all meetings (including
meeting notices) and of matters addressed or raised at such
meetings. Minutes of all Board meetings shall be circulated to all
Directors promptly after each meeting. Any Director who wishes to
propose any amendment or addition to the meeting minutes shall
submit the same in writing to the Chairman not later than fifteen
(15) days after receipt of the minutes, and the Chairman shall
circulate such proposal to all the Directors. Any Director who
wishes to object to the proposed amendment to the minutes shall
submit the same in writing to the Chairman and all other Directors
not later than fifteen (15) days after receipt of the proposed
amendment, otherwise such proposed amendment shall be adopted and
the minutes shall be amended accordingly. If the proposed amendment
and relevant objection are not resolved within thirty (30) days of
the Chairman's receipt of such objection, neither the proposal nor
the objection shall be adopted but both would be noted as an
attachment to the minutes. All Directors shall sign each page of the
final minutes within sixty (60) days after receipt of same, and
return such signed copy to the Joint Venture. The original minutes
shall be kept on file with the Joint Venture and shall be available
to any Director or their proxies for inspection or copying at any
reasonable time.
(11) No remuneration shall be paid by the Joint Venture to any of its
Directors in his/her capacity as such; provided, however, that in
the event that a Director is concurrently an officer of the Joint
Venture, such Director shall be entitled to remuneration for his/her
service as an officer only. A Director may recover from the Joint
Venture such expenses as are reasonably and properly incurred in
connection with his/her attending the Board meetings or other
activities of the Joint Venture where his/her presence is required.
The Board shall establish a policy to implement this subsection.
CHAPTER 9 OPERATION AND MANAGEMENT
9.1 Management Organization
(1) The Joint Venture shall establish an operation and management team
to be responsible for the Joint Venture's daily operation and
management. Such team shall include the General Manager and such
other personnel as determined by the Board of Directors (the
"MANAGEMENT PERSONNEL").
(2) The General Manager and the Joint Venture Controller ("JV
CONTROLLER") shall be appointed by the Board upon the nomination of
Party A and the Vice General Manager shall be appointed by the Board
upon the nomination of Party B. Each of the Management Personnel
shall be appointed or removed by the General Manager, except that
the Vice General Manager and JV Controller shall be appointed or
removed by the Board. Any of the Management Personnel shall handle
matters delegated to him or her by the General Manager and shall be
11
responsible to the General Manager for the efficient implementation
of such responsibilities.
(3) In the event that the General Manager, Vice General Manager or JV
Controller is found incompetent, commits graft or serious
dereliction of duty, he/she shall be dismissed by the Board.
9.2 Responsibilities of Management Personnel
(1) The responsibility of the General Manager shall be to carry out the
various resolutions of the Board and to organize and direct the
daily operation and management of the Joint Venture. The General
Manager may consult with the Vice General Manager in dealing with
material matters, but the General Manager shall have the authority
to make final decisions.
(2) Subject to the terms and conditions imposed by the Board, the JV
Controller shall be in charge of the day-to-day financial operations
of the Joint Venture under the supervision of the General Manager,
shall assist the General Manager in preparation of the documents set
out in Article 9.2(5)(a)(1) below, and shall carry out the decisions
of the Board and General Manager.
(3) With the exception that Management Personnel nominated by Party B
may remain to be employees of Party B, the other Management
Personnel shall be the full time employees of the Joint Venture and
shall not, without prior approval by the Board, hold any managerial
posts in other economic organizations while serving as an employee
of the Joint Venture. Without prior approval by the Board,
Management Personnel shall not hold any position in any economic
organization or other entities competing with the Joint Venture
except those affiliated to any Party which the Board confirms as
being exceptions. If the General Manager or any other Management
Personnel intends to resign from his or her position, such person
shall be required to submit the resignation notice to the Board at
least thirty (30) days prior to the intended departure date.
(4) The General Manager shall, within the scope of the authority
conferred upon him/her by the Board, represent the Joint Venture in
dealings with other parties, and appoint and dismiss subordinates.
(5) The General Manager shall be responsible for preparation of
following documents (all in both Chinese and English languages):
(a) he/she shall prepare for submission to the Board for review
and approval, and upon such approval shall implement, the
following:
(i) an annual operating plan, operating budget, marketing
and sales budget, financial budget, business and sales
performance targets for the Joint Venture;
(ii) the organizational and managerial rules of the Joint
Venture;
(iii) any other documents or plans for the Joint Venture that
are deemed necessary by the Board.
12
(b) he/she shall submit any major revisions to such budgets, plans
or manuals for the Joint Venture to the Board for review and
approval prior to their implementation.
(6) The General Manager shall submit a quarterly production and sales
report and quarterly financial statements for the Joint Venture to
the Board. Such reports and statements shall be submitted in both
Chinese and English languages within thirty (30) days following the
close of the quarter to which such a report relates.
(7) When the General Manager thinks he is unable to carry out his
duties, he may designate one of the Management Personnel to serve as
the acting General Manager in accordance with the terms and
conditions to be imposed or specified by the General Manager.
(8) The General Manager and all other Management Personnel and working
personnel of the Joint Venture shall be required not to disclose any
commercial secrets or trade secrets of the Joint Venture.
9.3 Qualifications of Management Personnel
(1) The General Manager and the other Management Personnel shall be
skilled and qualified as for the management of the Joint Venture,
and meet other qualifications and the performance criteria
established by the Board.
(2) Compensation and other terms and conditions of employment for the
General Manager and other Management Personnel shall be determined
by the Board and provided in the employment contracts signed between
the relevant individual and the Joint Venture. The Joint Venture
shall bear the salary as well as proper compensation package of
expatriate employees (if any).
9.4 Budget Control. Notwithstanding any provisions contained herein, any
capital expenditure of the Joint Venture in excess of United States
Dollars One Hundred Thousand (US$100,000) which is not included in the
annual capital expenditure budget shall be pre-approved by Party B or its
authorized representative.
CHAPTER 10 LABOR MANAGEMENT
10.1 Governing Principle. Matters relating to the recruitment, employment,
management, dismissal, resignation, wages, welfare benefits, subsidies and
other matters concerning the staff of the Joint Venture shall be
determined by the Board in accordance with the labor laws of the PRC. The
General Manager shall implement plans approved by the Board.
10.2 Working Personnel. Employees of the Joint Venture shall be employed in
accordance with the provisions of this Contract, the Articles of
Association, and the terms and conditions of the individual employment
contracts concluded with each respective employee.
10.3 Compensation. In accordance with PRC laws and regulations concerning labor
compensation, the General Manager shall implement a compensation system
whereby
13
employees are compensated in accordance with their technical ability,
education, performance and position.
10.4 Confidentiality and Non-compete. The Joint Venture shall enter into
Non-Disclosure and Non-Compete Contracts with each of its key employees,
and the terms of such contract shall be determined by the Board. The Board
may require the Joint Venture to enter into similar contracts with other
employees.
10.5 Labor Union. Employees of the Joint Venture may establish a labor union in
accordance with the Labor Union Law of the PRC (the "LABOR UNION LAW") and
other laws and regulations relating to labor union activities of foreign
invested enterprises. The Joint Venture shall allocate an ascertained
amount of funds to the labor union in accordance with the published and
effective laws and regulations in relation to labor union, which amount
shall be determined by the Board in accordance with the applicable laws
and regulations in China.
CHAPTER 11 FINANCIAL AFFAIRS AND ACCOUNTING
11.1 Accounting System.
(1) The Joint Venture shall maintain its books and record in accordance
with accounting systems and procedures established in accordance
with relevant PRC laws and regulations. Accounting systems and
records in accordance with any international accounting rules
preferred by Party B shall also be maintained to the full extent
permitted by PRC law. The accounting systems and procedures to be
adopted by the Joint Venture shall be submitted to the Board for
approval. Once approved by the Board, the accounting systems and
procedures shall be filed with the relevant government finance
department and tax department for records. The debit and credit
method, as well as the accrual basis of accounting, shall be adopted
as the methods and principles for keeping accounts.
(2) Unless this Article 11.1 provides otherwise, all accounting books
and financial statements of the Joint Venture, and all routine
accounting records, vouchers, etc., shall be made in both English
and Chinese if necessary.
(3) The Joint Venture shall adopt RMB as its standard bookkeeping base
currency and shall also use US Dollar as supplementary bookkeeping
currency. For purposes of preparing the Joint Venture's accounts and
statements of the Parties' capital contributions, and for any other
purposes where it may be necessary to effect a currency conversion,
such conversion shall be made in accordance with the conversion rate
published by and conversion method required by the State
Administration of Foreign Exchange on the date of actual payment.
(4) Monthly and annual financial statements for the Joint Venture shall
be prepared in both the Chinese and English languages, and in RMB
and in United States Dollars. Such statements shall include at least
the following: balance sheet, profit and loss statements, and cash
flow statement, and shall be kept by and provided to each Party and
to the relevant authorities as required by relevant PRC accounting
regulations.
11.2 Auditing.
14
(1) At the expense of the Joint Venture, the Joint Venture's Auditor
shall be appointed by the Board to conduct an audit of the annual
financial statements and accounts of the Joint Venture. The Parties
agree that the Joint Venture shall, within three (3) months after
the end of a fiscal year, submit to the Parties an annual statement
of final accounts (including the audited profit and loss statement,
balance sheet, cash flow statement, and statement for retained
earnings for the fiscal year), together with the audit reports of
the Joint Venture's Auditor.
(2) Each Party shall have the right at any time to audit the entire
accounts of the Joint Venture within thirty-six (36) months from the
end of the period to be audited. At the end of such audit, the Party
requesting such an audit may submit queries concerning the audit to
the Board. The Board shall reply in written form within sixty (60)
days after receipt of the queries concerning the audit. Reasonable
access to the Joint Venture's financial records shall be given to
such auditor and such auditor shall keep confidential all documents
under his/her audit.
(3) When a Party conducts an audit pursuant to Article 11.2(2), it shall
bear the expenses incurred and the responsibility for the appointed
auditor in maintaining confidentiality of all the documents so
audited.
11.3 Bank Account & Foreign Exchange Control. The Joint Venture shall open
foreign exchange accounts and RMB accounts and handle foreign exchange
transactions in accordance with relevant PRC laws and regulations. The
Board shall determine the signatories required for any disbursements of
funds from such accounts and shall establish internal control policies
relating to these accounts.
11.4 Fiscal Year. The Joint Venture shall adopt the calendar year as its fiscal
year, which shall begin on January 1 and end on December 31 of the same
year. The first fiscal year of the Joint Venture shall commence on the
Establishment Date and shall end on December 31 thereafter.
CHAPTER 12 PROFIT DISTRIBUTION
12.1 Allocation to Funds. After payment of income taxes by the Joint Venture,
the Board shall determine the annual allocations from the after-tax net
profits to set aside reserve funds, expansion funds and bonus and welfare
funds for staff and workers in accordance with applicable PRC laws and
regulations.
12.2 Dividend Policy. After payment of all payable income tax, and the
allocation of funds pursuant to Article 12.1 hereof, the Board shall
determine the annual dividend distribution of the Joint Venture to the
Parties in proportion to their respective Percentage Interests each year.
For the avoidance of doubt, the Joint Venture shall not, in any
circumstances, obtain any additional borrowings from any bank or other
third party for the purpose of financing dividend payment. All dividends
payable to Party B shall be paid in US$. The Joint Venture shall bear any
loss, gain or bank charges or other fees associated with the dividends
payment.
15
CHAPTER 13 TAXATION AND INSURANCE
13.1 Income Tax, Customs Duties and Other Taxes. The Joint Venture and its
employees shall pay taxes pursuant to relevant PRC laws and regulations.
The Joint Venture shall use its best endeavors to apply for and obtain
preferential treatment, including tax and customs benefits, permitted by
the law.
13.2 Insurance. The Joint Venture shall maintain, in accordance with relevant
PRC law, insurance as determined by the Board from time to time to cover
the Joint Venture's assets, operations and other business activities.
CHAPTER 14 PURCHASE OF MATERIALS AND SALE OF PRODUCTS
14.1 Purchase of Materials
(1) In meeting its requirements for materials, equipment, components,
transportation vehicles and articles for office use, the Joint
Venture will at its discretion purchase such items inside or outside
the PRC to the maximum extent consistent with the efficient
operation and quality standards of the Joint Venture.
(2) All the reasonable costs and expenses incurred by any Party in
connection with the sourcing and purchase for the Joint Venture as
stipulated in Article 14.1(1) shall be reimbursed by the Joint
Venture.
14.2 Sale of Products
(1) The Joint Venture shall formulate and, with the approval of the
Board, adopt both domestic and international sales plans for the
Products. The Joint Venture shall market, distribute and sell its
Products according to a pricing policy approved by the Board. The
Joint Venture may appoint distributors and sale agents in different
regions inside or outside the PRC, subject to the general terms and
conditions of such appointment.
(2) In order for the convenience of distributing, marketing and selling
the Products, the Joint Venture may establish branch offices inside
or outside the PRC subject to authorization by the Board and the
approval by the relevant authorities.
CHAPTER 15 CONFIDENTIALITY AND NON-COMPETE
15.1 Confidentiality.
(1) Except as otherwise specifically provided in this Article 15.1,
neither any Party nor the Joint Venture shall divulge, disclose or
communicate, or permit to be divulged, disclosed or communicated, to
any unaffiliated third party in any manner, directly or indirectly,
any Confidential Information, and each Party and the Joint Venture
shall ensure that their respective Affiliates, officers, directors,
employees (including, without limitation, individuals seconded
thereto), agents and contractors (collectively "REPRESENTATIVES") do
not divulge, disclose or
16
communicate, or permit to be divulged, disclosed or communicated, to
any unaffiliated third party in any manner, directly or indirectly,
any Confidential Information. Confidential Information shall remain
the exclusive and sole property of the relevant disclosing party
(the "PROTECTED PARTY") and shall be promptly returned upon the
request of the Protected Party.
(2) The Parties and the Joint Venture shall only disclose or permit to
be disclosed Confidential Information to those of their respective
Representatives who have a need to know such Confidential
Information (and then shall only disclose such portion of the
Confidential Information as is necessary) in order to consummate the
transactions contemplated herein and to establish or conduct the
Joint Venture's business and operations in the ordinary course. Each
Party and the Joint Venture shall advise its Representatives of the
confidentiality provisions hereunder, shall require relevant
Representatives to sign agreements substantially similar to the
Non-Disclosure and Non-Compete Contract, and shall be responsible to
the Protected Party for any noncompliance by any such
Representative.
(3) In the event that any Party, the Joint Venture, or any of their
respective Representatives is required by applicable law or is
validly ordered by a governmental entity having proper jurisdiction
to disclose any Confidential Information, the affected party shall,
as soon as possible in the circumstances, provide the Protected
Party with prompt prior written notice of the disclosure request or
requirement, and, if requested by the Protected Party, shall furnish
to the Protected Party an opinion of legal counsel that the release
of all such Confidential Information is required by applicable law.
The proposed disclosing party shall seek, with the reasonable
cooperation of the Protected Party if necessary, a protective order
or other appropriate remedy and shall exercise best efforts to
obtain assurances that confidential treatment will be accorded to
any Confidential Information disclosed.
(4) The Parties and the Joint Venture shall take all other necessary,
appropriate or desirable actions to preserve the confidentiality of
the Confidential Information.
(5) This Article 15.1 and the obligations and benefits hereunder shall
survive for a period of ten (10) years after the termination or
expiration of this Contract or the termination, dissolution or
liquidation of the Joint Venture or any of the Parties, provided
that, however, any information concerning, directly or indirectly,
the proprietary trade secrets of the Joint Venture or a Party shall
be preserved in confidentiality and be entitled to the obligations
and benefits hereunder in perpetuity.
15.2 Non-Compete. Party B hereby specifically undertakes that it shall, and
shall cause its Affiliates or related companies, to refrain from directly
or indirectly engaging in, whether by itself or through any individual or
entity, any activities that competes with any business or activities of
the Joint Venture anywhere in the PRC, during the period when it holds any
Interest in the Joint Venture and for a period of five (5) years after it
has ceased to hold any Interest in the Joint Venture.
17
CHAPTER 16 DURATION, TERMINATION AND LIQUIDATION
16.1 Joint Venture Term and Extension. The term of the Joint Venture shall be
fifty (50) years ("JOINT VENTURE TERM"), which shall commence on the
Establishment Date. One (1) year prior to the expiration of the Joint
Venture Term, the Parties may discuss the extension of such term. If the
Parties agree and the Board approves, an application for such extension
shall be submitted to the Examination and Approval Authority for approval
no less than six (6) months prior to the expiration of the Joint Venture
Term.
16.2 Termination.
(1) Unless extended in accordance with Article 16.1, this Contract shall
terminate automatically upon the expiration of the Joint Venture
Term.
(2) This Contract may be terminated at any time upon the written
agreement of all of the Parties, in which case the Parties shall
instruct the Directors to vote to liquidate the Joint Venture as per
this Contract and the relevant laws and regulation of the PRC.
(3) A Party (the "NOTIFYING PARTY") shall have the right to terminate
this Contract by providing written notice ("TERMINATION NOTICE") to
the other Party if any of the following events occur:
(a) one or more of the conditions specified in Article 5.3 are not
met within three (3) months of the date of execution by the
Parties of this Contract, and no resolution is agreed upon
following consultations between the Parties to extend the
capital contribution schedule specified in Article 5.2 herein,
or the extended capital contribution schedule would go beyond
the required time period under the relevant PRC laws and
regulations;
(b) a Party (not being the Notifying Party) materially breaches
the obligations contained in this Contract, or any of its
representations or warranties is or becomes untrue in any
material respect, and has failed to remedy such breach within
sixty (60) days of a written notice from the Notifying Party;
(c) a Party (not being the Notifying Party) is or becomes a party
to, bound by or held liable by any orders, decisions,
judgments, awards, decrees or rulings of any courts, arbitral
tribunals, governmental or regulatory agencies, as a result of
such Party's breach in any way of any applicable legislation,
laws, regulations, statutes, rules, guidelines, notices, or
circulars of any statutory or regulatory bodies, and said
breach would affect or change the intent or mind of the other
Party to enter into this Contract or maintain the partnership
with such Party, or would in any way hinder or interfere with
the execution or delivery by the other Party of this Contract
or its performance of any of the terms and obligations hereof;
(d) any Party (not being the Notifying Party) becomes bankrupt, or
is the subject of proceedings for liquidation or dissolution,
or ceases to carry on business or becomes unable to pay its
debts as they come due, in which
18
case the relevant Party shall immediately notify the other
Party in respect of such situation;
(e) the Joint Venture becomes bankrupt, or is the subject of
proceedings for liquidation or dissolution, or ceases to carry
on business or becomes unable to pay its debts as they come
due;
(f) the conditions or consequences of any event of Force Majeure
continue for a period of three (3) months without any
equitable solution agreed to by the Parties;
(g) all the members of the Board are unable to reach an agreement
on the business plans for the Joint Venture or the issues not
specified in the business scope of the Joint Venture as
defined in Article 4.2 above and such deadlock cannot be
resolved after a period of ninety (90) days;
(h) the Joint Venture's Business License is revoked, suspended, or
amended (in a manner not agreed to in writing by the Parties)
or in any other situation such that the Joint Venture is
precluded or prevented from carrying out its business; or
(i) the Joint Venture fails to obtain external finance such that
the Joint Venture is substantially prevented from implementing
its business plan, except if the Board decides to continue.
16.3 Subsequent Obligations
(1) Where a Termination Notice has been served in the circumstances set
out in Article 16.2(3)(b) or Article 16.2(3)(c), the non-breaching
Party shall have the option, but not the obligation, to sell its
Percentage Interest in the Joint Venture to the breaching Party in
accordance with the following procedures:
(a) within 30 days of the issuance of the Termination Notice, the
Board of Directors shall, by a majority vote appoint an
internationally recognized accounting firm or other appraiser
(an "APPRAISER") to determine the Book Value of the Joint
Venture. Such Appraiser shall complete its assessment of the
Book Value of the Joint Venture and notify the Parties thereof
in writing within 60 days of their appointment.
(b) upon completion of the determination of the Book Value of the
Joint Venture, the non-breaching Party shall have the option
to sell its share of the Registered Capital of the Joint
Venture to the breaching Party at a price equal to:
Book Value x 80% the non-breaching Party's share of the
Registered Capital at the time of valuation
(c) The purchasing Party shall have the right to designate a third
party enterprise to purchase all or part of the non-breaching
Party's Percentage Interest for the price (or portion thereof)
set forth in Article 16.3(1)(b) hereof.
19
(d) The Parties agree to take all such steps as may be required to
effect the sale of the selling Party's Interest in the Joint
Venture, including obtaining all necessary government
approvals for the transfer of the Interest to the purchasing
Party (or its designee) and causing their respective Board
appointees to approve such transfer, and executing all
documents necessary or advisable to effect such transfer. If
such government approvals are not obtained within ninety (90)
days after the signing of the interest transfer agreement
between the selling Party and the purchasing Party (or its
designee), the exercise of the option shall be null and void
and the Joint Venture shall be liquidated, if so proposed by
the non-breaching Party, in accordance with the provisions of
Article 16.4 hereof. Such liquidation shall not prejudice the
rights that the non-breaching Party may otherwise have against
the breaching Party.
(2) Where a Termination Notice has been served in any circumstances
except as set out in Article 16.2(3)(b) and Article 16.2(3)(c), the
following shall apply:
(a) Party B shall have the option, but not the obligation, to sell
its Percentage Interest in the Joint Venture to Party A at a
price equal to the Book Value as determined by the Auditor of
such Percentage Interest at the time To exercise its right,
Party B must provide a written notice of its intention thereof
("NOTICE") within fifteen (15) days after the Termination
Notice was issued. The Parties shall then complete the sale of
Percentage Interest of Party B to Party A within the longer of
the period of ninety (90) days after receipt of the Notice or
fifteen (15) days after such sale of Percentage Interest is
duly approved by the Examination and Approval Authority and
registered with the Registration Authority. If Party B fails
to exercise its right to sell its Percentage Interest to Party
A, Party A shall have the right to purchase Party B's
Percentage Interest at a price equal to the Book Value of such
Percentage Interest at the time. To exercise its right, Party
A shall provide a Notice to Party B within the 15-day period
starting from the sixteenth (16th) day after the Termination
Notice is issued or a later date on which Party A learns that
Party B will not exercise its right stated above. The Parties
shall then complete the sale of Party B's Percentage Interest
to Party A within the longer of the period of ninety (90) days
after receipt of the Notice or fifteen (15) days after such
sale of Percentage Interest is duly approved by the
Examination and Approval Authority and registered with the
Registration Authority.
(b) If no Party wishes to exercise its right as stated in Article
16.3(2)(a), the Parties shall use all reasonable efforts to
sell the Joint Venture as a going concern to one or more third
parties, either as a single transaction or through more than
one transaction. In this Article 16.3(2), third parties
include Affiliates. The Parties shall cooperate and cause the
Directors appointed by them to cooperate in any required
re-structuring of the Joint Venture prior to such sale if
necessary or desirable to facilitate the same or optimize the
salability of the Joint Venture and the business conducted by
it and the sales proceeds for the Parties. The price and terms
of such sale shall be agreed between the third party(ies)
concerned and the Parties.
20
(3) In the event that Party B together with any of its Affiliates cease
to have any interest in the Registered Capital of the Joint Venture,
each Party shall take all steps necessary to ensure that the name of
the Joint Venture is immediately changed so that it no longer
contains any reference to "Cooper" in English or the local Chinese
language equivalent of such name.
(4) Termination of this Contract shall not affect the rights and
obligations of the Parties and the Joint Venture incurred prior to
the termination or caused by such termination. If termination of
this Contract is caused by a Party's breach of any of its
obligations under this Contract, then such Party shall compensate
the other Party and the Joint Venture for all of their losses
resulting from such breach.
16.4 Liquidation.
(1) Liquidation of the Joint Venture shall begin from the earliest of
the date of liquidation approval by the relevant Examination and
Approval Authority, the date on which this Contract is terminated
under Article 16.2 (provided a buy-sell is not effected), the date
on which the Share Purchase Agreement is terminated under Article 11
thereof, or by a court or arbitration order, or the date which is
30-day prior to expiration of the Joint Venture Term.
(2) The Board shall within fifteen (15) days from the beginning of the
liquidation as provided in Article 16.4 hereof, appoint a
liquidation committee that shall be entitled to represent the Joint
Venture in all legal matters during the period of liquidation. The
liquidation committee shall value and liquidate the Joint Venture's
assets in accordance with applicable PRC laws and regulations and
the principles set out herein.
(3) The liquidation committee shall be made up of three (3) members
appointed by the Board, two (2) of whom shall be recommended by
Party A and one (1) of whom shall be recommended by Party B. Members
of the liquidation committee in principle shall be selected from the
Directors of the Joint Venture. Any Party may recommend the
appointment of professional advisors to be members of or to assist
the liquidation committee.
(4) The liquidation committee shall conduct a thorough examination of
the Joint Venture's assets and liabilities, on the basis of which it
shall, in accordance with the relevant provisions of this Contract,
develop a liquidation plan which, if approved by the Board, shall be
executed under the liquidation committee's supervision. Settlement
of any claim, debt or assets under liquidation shall be approved
unanimously by members of the liquidation committee; failing such
unanimous approval, simple majority approval by the Board shall be
required.
(5) In developing and executing the liquidation plan, the liquidation
committee shall use every effort to obtain the highest possible
price for the Joint Venture's assets.
(6) The liquidation expenses, including remuneration to members of and
advisors to the liquidation committee, shall be paid in accordance
with the PRC law out of the Joint Venture's assets in priority to
the claims of other creditors.
21
(7) After the liquidation committee has settled all legitimate debts of
the Joint Venture, including, if applicable, the expenses of the
liquidation committee in accordance with Article 16.4 (6), any
remaining assets shall be distributed to the Parties in proportion
to their Percentage Interests. With respect to fixed assets
distributed to the Parties, in the event that a Party intends to
sell such fixed assets to a third party, the other Party shall have
the preemptive right during the liquidation period to purchase such
fixed assets on the same terms and conditions and at the same price
as offered to any third party.
(8) On completion of liquidation, the liquidation committee shall
prepare a liquidation report and liquidation accounting statement.
The liquidation committee shall, with its unanimous approval appoint
an auditor to examine the report and statement and issue a
verification report.
(9) After completion of the liquidation of the Joint Venture, unless the
tax authority requires otherwise, the original accounting books and
other documents of the Joint Venture shall be left in the care of
Party A to make and retain copies of all or any of such books and
documents, after which such books and documents shall be left in the
care of Party B.
CHAPTER 17 BREACH OF CONTRACT
In the event that a breach of contract committed by any Party to this Contract
results in the non-performance of or inability to fully perform this Contract,
the liabilities arising from the breach of Contract shall be borne by the Party
in breach. In the event that the Parties commit a breach of Contract, each Party
shall bear its individual share of the liabilities arising from the breach of
Contract. Any breach of this Contract by any Party's Affiliate shall be deemed a
breach by such Party.
CHAPTER 18 FORCE MAJEURE
18.1 Scope of Force Majeure. A "FORCE MAJEURE EVENT" shall mean any event,
circumstance or condition that (i) directly or indirectly prevents the
fulfillment of any material obligation set forth in this Contract, (ii) is
beyond the reasonable control of the respective Party, and (iii) could
not, by the exercise of reasonable care, have been avoided or overcome in
whole or in part by such Party. Subject to the aforementioned items (i),
(ii) and (iii), Force Majeure Event includes, but is not limited to, acts
of God, war, terrorism, civil commotion, riot, blockade or embargo, delays
of carriers, fire, explosion, labor dispute, casualty, accident,
earthquake, epidemic, flood, windstorm, or by reason of any law, order,
proclamation, regulation, ordinance, demand, expropriation, requisition or
requirement or any other act of any governmental authority, including
military action, court orders, judgments or decrees.
18.2 Notice. Should any Party be prevented from performing the terms and
conditions of this Contract due to the occurrence of a Force Majeure
Event, the prevented Party shall send notice to the other Party within
fourteen (14) days from the occurrence of the Force Majeure Event stating
in the details of such Force Majeure Event.
22
18.3 Performance. Any delay or failure in performance of this Contract caused
by a Force Majeure Event shall not constitute a default by the prevented
Party or give rise to any claim for damages, losses or penalties. Under
such circumstances, the Parties are still under an obligation to take
reasonable measures to perform this Contract, so far as is practical. The
prevented Party shall send notice to the other Party as soon as possible
of the elimination of the Force Majeure Event, and confirm receipt of such
notice.
18.4 Consultations and Termination. Should the Force Majeure Event continue to
delay implementation of this Contract for a period of more than three (3)
months, the Parties shall, through consultations, decide whether to
terminate or modify this Contract. Should the Force Majeure Event continue
for a period of six (6) months or longer, any Party may terminate this
Contract by giving notice to the other Party in accordance with Article
16.2.
CHAPTER 19 DISPUTE RESOLUTION
19.1 Consultations and Arbitration. Any and all disputes, controversies or
claims ("DISPUTE") arising out of or relating to the formation, validity,
interpretation, implementation or termination of this Contract, or the
breach hereof or relationships created hereby shall be settled through
friendly consultations. If a Dispute is not resolved through friendly
consultations within thirty (30) days from the date a Party gives the
other Party written notice of a Dispute, then it shall be resolved
exclusively and finally by arbitration in Singapore at the Singapore
International Arbitration Center ("SIAC") in accordance with the
Arbitration Rules of the SIAC ("SIAC RULES") for the time being in force
which rules are deemed to be incorporated by reference to this clause.
19.2 Arbitration Proceedings and Award. Arbitration Proceedings and Award. Any
arbitration shall be heard before a tribunal consisting of three (3)
arbitrators. Each side of the Dispute shall appoint one (1) arbitrator.
The two arbitrators thus appointed shall choose the third arbitrator who
will act as the presiding arbitrator of the tribunal. If the two
arbitrators have not agreed on the choice of the presiding arbitrator, the
presiding arbitrator shall be appointed by the Chairman of the HKIC. The
language of the arbitration shall be English and Chinese. The arbitration
shall be final and binding on the Parties, shall not be subject to any
appeal, and the Parties agree to be bound thereby and to act accordingly.
The award of the arbitrators may be enforced by any court having
jurisdiction to do so. Throughout any dispute resolution and arbitration
proceedings, the Parties shall continue to perform this Contract, to the
extent practical, with the exception of those parts of this Contract that
are under arbitration. Except as otherwise determined by the arbitration
tribunal, each Party shall be responsible for its expenses incurred in
connection with resolving any Dispute, but the arbitration fees shall be
borne by the losing side of the Dispute.
19.3 Injunctive Relief. Notwithstanding any other provision of this Contract,
each Party acknowledges that a breach of provisions on confidentiality as
provided in Article 15.1 or non-competition in Article 15.2 or other
obligations under this Contract may result in irreparable harm and damage
to the affected Party and its Affiliates in an amount that is difficult to
ascertain and that cannot be adequately compensated by a monetary award.
Accordingly, in addition to any other relief to which the affected Party
and its Affiliates may be entitled, such Party shall be entitled to
temporary and/or permanent injunctive
23
relief from any breach or threatened breach by the relevant Party without
proof of actual damages that have been or may be caused to such Party by
such breach or threatened breach.
CHAPTER 20 GOVERNING LAW & CHANGE OF LAW
20.1 Applicable Law. The formation of this Contract, its validity,
interpretation, execution and any performance of this Contract, and the
settlement of any Disputes hereunder, shall be governed by published and
publicly available laws, rules and regulations of the PRC, the applicable
provisions of any international treaties and conventions to which the PRC
is a party, and, if there are no published or publicly available PRC laws,
rules or regulations, or treaties or conventions governing a particular
matter, by general international commercial practices.
20.2 Change of Law. If any Party's economic benefits as a shareholder in the
Joint Venture is adversely and materially affected by the promulgation of
any new PRC laws, rules or regulations or the amendment or interpretation
of any existing PRC laws, rules or regulations after the Effective Date,
the Parties shall promptly consult with each other and use their best
endeavors to implement any adjustments necessary to maintain each Party's
economic benefits derived from this Contract on a basis no less favorable
than the economic benefits it would have derived if such laws, rules or
regulations had not been promulgated or amended or so interpreted.
CHAPTER 21 EFFECTIVE DATE OF THE CONTRACT
21.1 Effective Date. This Contract and the Articles of Association shall become
effective on the date on which this Contract and the Articles of
Association are approved by the Examination and Approval Authority as
evidenced by the issuance of the Certificate of Approval (referred to as
the "EFFECTIVE DATE"). In case of conflict between the provisions of this
Contract and the provisions of the Articles of Association, the terms of
this Contract shall prevail.
21.2 Delivery. Party A shall promptly deliver to Party B copies of all approval
certificates and registration documents issued by, and written
confirmation of all communications with, the relevant Examination and
Approval Authority and Registration Authority and all other relevant
government authorities, in respect of this Contract, the Articles of
Association, the Share Purchase Agreement, and the operation of the Joint
Venture.
CHAPTER 22 MISCELLANEOUS PROVISIONS
22.1 Language. This Contract is written and executed in a Chinese version and
in an English version. Both language versions of this Contract are of
equal validity and effect. In case of any discrepancy between the Chinese
version and the English version, the Chinese version approved by the
Examination and Approval Authority shall prevail.
22.2 Waiver and Preservation of Remedies. No delay on the part of any Party in
exercising any right, power or privilege under this Contract shall operate
as a waiver thereof, nor shall any waiver on the part of any Party of any
right, power or privilege hereunder, nor any single or partial exercise of
any right, power or privilege hereunder, preclude any other or other
exercise thereof hereunder. The rights and remedies herein provided are
24
cumulative and are not exclusive of any rights or remedies that any Party
may otherwise have.
22.3 Notices. All notices or other communications under this Contract shall be
in writing and shall be delivered or sent to the correspondence addresses
or facsimile numbers of the Parties set forth below or to such other
addresses or facsimile numbers as may be hereafter designated in writing
on seven (7) days' notice by the relevant Party. All such notices and
communications shall be effective: (i) when delivered personally; (ii)
when sent by telex, telefacsimile or other electronic means with sending
machine confirmation; (iii) ten (10) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid;
or (iv) four (4) days after deposit with a commercial overnight courier,
with evidence of delivery provided by the courier.
Party A Address: No 98, North Nan Shan Road, Rongcheng City,
Shandong Province, PRC[
Tel: (86-631) 7523 205
Fax: (86-631) 7523 888
Attn: Zhang Jun Quan
Party B Address: Chancery House, High Street, Bridgetown,
Barbados, W.I.
Tel: 1 (246) 431-0070
Fax: 1 (246) 431-0076
Attn: Keisha N. Hyde
22.4 Severability. If any provision of this Contract should be or become fully
or partially invalid, illegal or unenforceable in any respect for any
reason whatsoever, the validity, legality and enforceability of the
remaining provisions of this Contract shall not in any way be affected or
impaired thereby.
22.5 Entire Agreement. This Contract, together with its Appendices which are
hereby incorporated by reference as an inseparable and integral part of
this Contract, constitutes the entire agreement between the Parties with
reference to the subject matter hereof, and supersede any agreements,
contracts, representations and understandings, oral or written, made prior
to the signing of this Contract.
22.6 Modification and Amendment. No amendment or modification of this Contract,
whether by way of addition, deletion or other change of any of its terms,
shall be valid or effective unless a variation is agreed to in writing and
signed by authorized representatives of each of the Parties and approved
by the Examination and Approval Authority.
22.7 Successors. The Parties agree and procure that this Contract shall inure
to the benefit of and be binding upon each of the Parties and their
respective permitted successors and permissible assignees.
22.8 Originals. This Contract is executed in eight (8) original counterparts,
each of which shall have equal effect in law.
25
22.9 Costs and Expenses. Except as otherwise provided herein, each Party shall
be responsible for the costs and expenses it incurred in connection with
the negotiation and execution of this Contract, the Articles of
Association, and the Share Purchase Agreement.
26
IN WITNESS WHEREOF, each of the Parties has executed this Contract or has caused
this Contract to be executed by its duly authorized officer or officers as of
the date first above written.
PARTY A: CHENGSHAN GROUP COMPANY LTD.
By: ___________________________________________
Name: Che Hong-Zhi
Title: Chairman of Board
Nationality: Chinese
PARTY B: CTB (BARBADOS) INVESTMENT CO. LTD.
By: ___________________________________________
Name: Harold C. Miller
Title: President
Nationality: USA
27
JOINT VENTURE CONTRACT
APPENDIX 1
DEFINITIONS AND INTERPRETATION
1.1 "AFFILIATE" means, with respect to any Person, any other Person
controlling or controlled by or under common control with such specified
Person. For purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of shares, registered capital or voting securities, by contract
or otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
1.2 "ARTICLES OF ASSOCIATION" means the articles of association of the Joint
Venture executed by the Parties simultaneously with this Contract, as such
articles of association may be amended from time to time by the Parties.
1.3 "AUDITOR" means an accounting firm registered in the PRC, engaged at the
Joint Venture's own expense upon resolution of the Board, which shall be
the auditor of the Joint Venture and which firm shall be independent of
the Parties and independent of the Joint Venture.
1.4 "BOARD OF DIRECTORS" or "BOARD" means the board of directors of the Joint
Venture established in accordance with this Contract.
1.5 "BOOK VALUE" means the historic accounting value of the equity of the
Joint Venture based on Chinese generally accepted accounting principles
(GAAP).
1.6 "BUSINESS LICENSE" means the business license of the Joint Venture as
issued by the Registration Authority to indicate the Company being
converted into and registered as the Joint Venture, and any of amendments
or replacements thereof.
1.7 "CERTIFICATE OF APPROVAL" means the certificate of approval issued by the
Examination and Approval Authority approving this Contract and the
Articles of Association.
1.8 "COMPANY" shall have the meaning ascribed to such term in Whereas (A).
1.9 "CONFIDENTIAL INFORMATION" means the terms of this Contract and all
technical, financial, business, commercial, operational and strategic
information and data, know-how, trade secrets and any analysis,
amalgamation, market studies or compilation, whether written or unwritten
and in any format or media, concerning, directly or indirectly, the
business of the Joint Venture or a Party, which has been prior to the
Establishment Date, or which may be during the Joint Venture Term,
delivered or furnished by a Party, the Joint Venture, or any of their
respective Representatives, to another Party, the Joint Venture, or any of
their respective Representatives, but shall not include any information
that: (a) at the time of disclosure is (or thereafter becomes) generally
available to the public through no act of any Person in violation of a
confidentiality obligation or applicable law; or (b) the receiving Party
has obtained lawfully from an independent source not subject to a
confidentiality obligation; or (c) the
28
receiving Party can prove was known to it or to its Representatives prior
to the receipt of such information from the disclosing Party; or (d) is
independently developed by the receiving Party without any access to or
knowledge of such information.
1.10 "DAY" refers to a calendar day.
1.11 "DIRECTOR" or "DIRECTOR OF THE JOINT VENTURE" means any member of the
Board.
1.12 "DISPUTE" shall have the meaning ascribed to such term in Article 19.1.
1.13 "EFFECTIVE DATE" means the date on which this Contract comes into effect
in accordance with Article 21.1.
1.14 "EQUITY JOINT VENTURE LAW" means the PRC, Sino-foreign Equity Joint
Venture Law (adopted by the National People's Congress on July 1, 1979 and
revised on March 15, 2001), as such law may from time to time be amended,
or its successor laws.
1.15 "EQUITY JOINT VENTURE REGULATIONS" means the PRC, Sino-foreign Equity
Joint Venture Law Implementing Regulations (promulgated by the State
Council on September 20, 1983 and revised on July 22, 2001), as such
regulations may from time to time be amended, or any successor
regulations.
1.16 "ESTABLISHMENT DATE" means the date on which the Joint Venture's first
Business License is issued by the Registration Authority.
1.17 "EXAMINATION AND APPROVAL AUTHORITY" means the Ministry of Commerce, or
its authorized local division or any successor government institution or
agency empowered to approve the Asset Purchase Agreement, this Contract,
the Articles of Association, and any amendments, supplements,
modifications or termination hereof or thereof.
1.18 "INTEREST" shall have the meaning ascribed to such term in Article 2(1) of
Appendix 2.
1.19 "JOINT VENTURE" means Cooper Taiji (Shandong) Steel Cord Company Ltd., the
Sino-foreign equity joint venture limited liability company established
and operated by the Parties pursuant to this Contract.
1.20 "JOINT VENTURE TERM" shall have the meaning ascribed to such term in
Article 16.1 hereof.
1.21 "NON-DISCLOSURE AND NON-COMPETE CONTRACT" means the contract between the
Joint Venture and each of its key employees (including, without
limitation, the General Manager, all other management personnel, and all
technical personnel), whereby such key employees undertake to keep
confidential the confidential information of the Joint Venture and to
refrain from engaging in any business or activities that directly or
indirectly compete with any business of the Joint Venture.
1.22 "NOTIFYING PARTY" shall have the meaning ascribed to such term in Article
16.3(3).
29
1.23 "PERCENTAGE INTEREST" means, with respect to each Party, such Party's
percentage interest in the equity of the Joint Venture.
1.24 "PERSON" means any individual, company, legal person enterprise, non-legal
person enterprise, joint venture, partnership, wholly owned entity, unit,
trust or other entity or organization, including, without limitation, any
government or political subdivision or any agency or instrumentality of a
government or political subdivision and other body corporate or
unincorporated; Person also includes a reference to that Person's legal
representatives, assignees, successors or heirs.
1.25 "PRC" or "CHINA" means the People's Republic of China.
1.26 "PRODUCTS" means the steel cords, tire bead wires
1.27 "PROTECTED PARTY" shall have the meaning ascribed to such term in Article
15.1(1) hereof.
1.28 "QUALIFIED LENDERS" shall have the meaning ascribed to such term in Part 2
of Appendix 2.
1.29 "REGISTERED CAPITAL" means the total amount of equity of the Joint Venture
pursuant to Chapter 5 as such equity amount may be adjusted according to
the relevant provisions of this Contract and relevant PRC law.
1.30 "REGISTRATION AUTHORITY" means the State Administration of Industry and
Commerce, or its local division or any successor government institution or
agency empowered to issue a Business License to the Joint Venture.
1.31 "RENMINBI" or "RMB" means the lawful currency of the PRC.
1.32 "REPRESENTATIVES" shall have the meaning ascribed to such term in Article
15.1(1) hereof.
1.33 "SHARE PURCHASE AGREEMENT" shall have the meaning ascribed to such term in
Article 5.8.
1.34 "TERMINATION NOTICE" shall have the meaning ascribed to such term in
Article 16.3(3).
1.35 "TRANSFERRING PARTY" shall have the meaning ascribed to such term in
Article 6.2(1).
1.36 "UNITED STATES DOLLARS" or "US$" means the lawful currency of the United
States of America.
1.37 "AND/OR" means that both cases apply, or either the first or the second
case applies.
1.38 Words used in any gender in this Contract shall include references to all
other genders; and words used in the singular in this Contract shall
include references to the plural, and vice versa.
30
1.39 Descriptive headings in this Contract are for convenience only and shall
not control or affect the meaning or construction of any of the provisions
of this Contract or any of the Appendices.
31
JOINT VENTURE CONTRACT
APPENDIX 2
PART 1
EQUITY TRANSFER/PLEDGE RULES
1. General Principles. Each Party undertakes that, except as permitted in
this Appendix 2 or as otherwise agreed by the Parties, it shall not sell,
transfer, assign or otherwise dispose of the legal or beneficial ownership
of, or create any mortgage, charge, pledge, or other encumbrance over or
security interest in, either the entire or any part of its equity interest
in the Joint Venture or its rights and obligations under this Contract or
otherwise in relation to the Joint Venture whatsoever without the prior
written consent of the other Party and subject to compliance with relevant
PRC law.
2. Procedure for Transfers.
(1) In the event that a Party (the "TRANSFERRING PARTY") desires to
transfer or otherwise dispose of all or any portion of its
Percentage Interest in the Joint Venture (the "INTEREST") (other
than pursuant to the provisions of paragraph 2(3) below), it shall
first notify the other Party (the "NON-TRANSFERRING PARTY") in
writing of (i) its intent to transfer or otherwise dispose of its
Interest, (ii) the proposed percentage of the Interest to be
transferred or disposed, (iii) the price and principal terms and
conditions of the proposed transfer or disposal, and (iv) the
identity of the proposed third party transferee (the "NOTICE"). The
Non-Transferring Party will have thirty (30) days from the receipt
of the Notice to notify the Transferring Party whether they desire
to purchase the Interest and, if so, the sale of Interest shall be
completed in accordance with the terms and conditions set forth in
the Notice within the longer of the period of ninety (90) days after
receipt of the Notice or fifteen (15) days after such sale of
Interest is duly approved by the Examination and Approval Authority
and registered with the Registration Authority. If no response or a
negative response is given by the Non-Transferring Party in respect
of a proposed transfer within the thirty (30) day period, the
Non-Transferring Party shall be deemed to have consented to the
proposed transfer or disposal of the Interest between the
Transferring Party and the proposed transferee identified in the
Notice excluding any third party capable of competing against the
Joint Venture. It shall be a condition of the transfer that such
transferee shall agree to become party to and to be bound by the
terms of this Contract and thereafter any reference to a Party
herein shall be deemed to include a reference to such transferee as
if named herein as a Party.
(2) In circumstances of a transfer of Interest under paragraph 2(1), the
Non-Transferring Party shall be deemed to consent to, and shall
cause all of the Directors nominated by it to vote in favor of, any
such transfer carried out in accordance with the procedures
stipulated herein.
(3) Notwithstanding any other provisions in this Contract or this
Appendix, if a Party wishes to transfer all or any part of its
portion of its Percentage Interest to an Affiliate, such Party shall
notify the other Party in writing, and shall provide
32
documentary evidence of the relationship between the Party proposing
the transfer and the relevant Affiliate. The other Party shall
immediately agree such transfer, waive its preemptive rights, and
cause all Directors nominated by them to vote in favor of such
transfer, and such transfer shall thereafter be duly presented to
the Examination and Approval Authority for approval.
(4) No transfer of any part of a Party's Interest shall become effective
until the transferee (whether an Affiliate or a third party) has
delivered to the Non-transferring Party a valid and effective
undertaking to perform the obligations of the Transferring Party
under this Contract and be bound by its terms as if the transferee
had been an original Party to this Contract.
(5) Any sale, transfer, assignment, or disposal pursuant to this
Appendix shall be submitted to the Examination and Approval
Authority for examination and approval. Upon receipt of the approval
document from the Examination and Approval Authority the Joint
Venture shall register the change in ownership with the Registration
Authority.
3. Pledge of Interest. Party B or its permitted successor may pledge not more
than 70% of its Percentage Interest (the "PLEDGED INTEREST") to any of the
Qualified Lenders set forth in the Part 2 herein for its own financing
purposes with the prior written consent of Party A.
33
JOINT VENTURE CONTRACT
APPENDIX 2
PART 2
QUALIFIED LENDERS AS SELECTED BY PARTY B
(a) licensed PRC national commercial banks (and their permitted branches or
subsidiaries), such as, Bank of China, China Construction Bank, Industrial
and Commercial Bank of China, Agricultural Bank of China;
(b) reputable international banks (and their permitted branches or
subsidiaries) licensed to carry out financial business and service in
China;
(c) licensed PRC national policy banks (and their permitted branches or
subsidiaries), such as, Export and Import Bank of China, National
Development Bank, Agricultural Development Bank of China; and
(d) PRC joint-stock commercial banks (and their permitted branches or
subsidiaries) licensed to carry out nationwide financial business and
service in China, such as, for example, Bank of Communications, Minsheng
Bank, China Merchants Bank, etc.
34
JOINT VENTURE CONTRACT
APPENDIX 3
SHARE PURCHASE AGREEMENT
35