EXCLUSIVE CONSULTING AGREEMENT
Exhibit
10.7
This
Exclusive Consulting Agreement (the "Agreement") is entered into as of June 27,
2008, between ARMCO & METAWISE (H.K.) LIMITED, a Hong Kong limited liability
company with its principal office located at Xxxx 0000, Xxxxx Resources
Xxxxxxxx, 00 Xxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx (hereinafter referred
to as “ARMCO”) and HENAN ARMCO & METAWISE TRADING CO., LTD., a limited
liability company organized under the laws of the Peoples Republic of
China with its principal office located at Xx. 0000, 00 Xxxxx, Xx.0
Xxxxxxxx Xx.00 Jing San Road, Jin Shui District, Xxxxx Xxxx City, China
(“HENAN”):
WHEREAS,
ARMCO is engaged in the sale and distribution of metal ores and non-ferrous
metals and provides business consulting services;
WHEREAS,
HENAN is developing and constructing a steel recycling facility in the Banqiao
Industrial Zone of Lianyungang Economic Development Zone in the Jiangsu Province
of China (the “Business”);
WHEREAS,
HENAN is a wholly owned subsidiary of ARMCO; and
WHEREAS,
ARMCO desires to be the provider of business consulting and related services to
HENAN, and HENAN hereby agrees to accept such business consulting and
services;
NOW
THEREFORE, the parties agree as follows:
1. BUSINESS
CONSULTING AND SERVICES; EXCLUSIVITY
1.1 During
the term of this Agreement, ARMCO agrees to, as the exclusive business
consulting services provider of HENAN and provide the business consulting
services to HENAN set forth on Schedule A (the “Services”).
1.2 HENAN
hereby agrees to accept the Services and ARMCO’s appointment as the exclusive
business consulting services provider of HENAN. HENAN further agrees that,
during the term of this Agreement, it shall not utilize any third party to
provide such business consulting services without the prior written consent of
ARMCO.
2. CONSULTING
FEES
2.1 During
the term of this Agreement, HENAN shall pay to ARMCO a consulting fee (“Fee”)
for the Services in an amount equal to 100% of HENAN’s cash flows from operating
activities (“Operating Cash Flow”). The Fee shall be paid quarterly by HENAN to
ARMCO within 10 days following the end of each fiscal quarter based on the
Operating Cash Flow for such quarter as estimated by ARMCO and HENAN in good
faith (“Estimated Quarterly Amount”).
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2.2 Notwithstanding
anything to the contrary contained in this Agreement, for each fiscal year of
HENAN, (i) in the event that 100% of HENAN’s Net Income (as defined below) for
the fiscal year is less than the Fee for such fiscal year, the Fee shall be
adjusted such that it shall be equal to 100% of HENAN’s Net Income for such
fiscal year, and (ii) in the event that 100% of HENAN’s Net Income is greater
than the Fee for such fiscal year, the Fee shall be increased such that it shall
be equal to 100% of HENAN’s Net Income for such fiscal year.
2.3 For
the purposes of this Agreement, the determination and calculation of Operating
Cash Flow and Net Income shall be made in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”) as reflected on HENAN’s U.S. GAAP
financial statements, which have been reviewed or audited by ARMCO’s independent
accountant, before giving effect to the Fee paid or payable under this
Agreement. Any disputes with respect to the determination or
calculation of the Fee, Net Income or Operating Cash Flow shall be resolved by
ARMCO’s independent accountant, and such determination shall be
final.
3. REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1 ARMCO
HEREBY REPRESENTS AND WARRANTS AS FOLLOWS:
3.1.1 ARMCO
is a limited liability company duly registered and validly existing under the
laws of Honk Kong and is authorized to engage in the business of consulting
services.
3.1.2
ARMCO has full right, power, authority and capacity and all consents and
approvals of any other third party and government necessary to execute and
perform this Agreement, which shall not be against any enforceable and effective
laws or contracts.
3.1.3 Once
this Agreement has been duly executed by both parties, it will constitute a
legal, valid and binding agreement of ARMCO and is enforceable against it in
accordance with its terms upon its execution.
3.2 HENAN
HEREBY REPRESENTS AND WARRANTS AS FOLLOWS:
3.2.1
HENAN is a limited liability company duly registered and validly existing under
the laws of the PRC and is authorized to engage in the Business.
3.2.2
HENAN has full right, power, authority and capacity and all consents and
approvals of any other third party and government necessary to execute and
perform this Agreement, which shall not be against any enforceable and effective
laws or contracts.
3.2.3
Once this Agreement has been duly executed by both parties, it will constitute a
legal, valid and binding agreement of HENAN and is enforceable against it in
accordance with its terms upon its execution.
3.3 HENAN
COVENANTS
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3.3.1 HENAN hereby pledges
all of its accounts receivable and assets to ARMCO as security for the payment
of HENAN’s obligations under this Agreement and payment for the
Services. Upon the request of ARMCO at any time and from time to time, HENAN
will execute such further pledge and/or guarantee contracts in favor of ARMCO
and will take any and all actions necessary to register such pledge and/or
guarantee contracts with the appropriate PRC government authorities
as may be required.
3.3.2 HENAN
hereby agrees that HENAN shall not conduct any transaction which may materially
affect its assets, obligations, rights or the Business unless it obtains a prior
written consent from ARMCO, including without limitation the following
actions:
(a) To borrow money from any
third party or assume any debt;
(b) To sell to any third
party or acquire from any third party any assets or rights, including without
limitations, any plant, equipment, real property or personal property, or any
intellectual property rights;
(c) To provide any guaranty
for any third party obligations;
(d) To assign to any third
party any agreements related to the Business;
(e) To engage in any other
business consulting agreements with any third party or to engage in any other
business activities other than the Business; and
(f) To pledge any of its
assets or intellectual property rights to any third party as a security
interest.
3.3.3 HENAN
hereby agrees to accept the operational guidance set by ARMCO on, including but
not limited to, business and marketing strategies, business planning, business
operational guidance, the appointment and dismissal of HENAN’s directors and
officers (as provided for herein), the hiring and firing of HENAN’s employees,
HENAN’s daily operation of the Business, and its financial and budgeting
system.
3.3.4 HENAN
shall appoint personnel recommended by ARMCO as the directors of HENAN, and
HENAN shall appoint those candidates recommended by ARMCO as HENAN's General
Manager, Chief Financial Officer, and other high level managerial
positions.
4. CONFIDENTIALITY
4.1 HENAN
agrees to use all reasonable means to protect and maintain the confidentiality
of ARMCO's confidential data and information acknowledged or received by HENAN
by accepting the exclusive consulting and services from ARMCO (collectively the
“Confidential Information"). HENAN shall not disclose or transfer any
Confidential Information to any third party without ARMCO's prior written
consent. Upon termination or expiration of this Agreement, HENAN shall, at
ARMCO's option, deliver any and all documents, information or software
containing any of such Confidential Information to ARMCO or destroy it or delete
all of such Confidential Information from any memory devices, and cease to use
them.
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4.2
Section 4.1 shall survive after any amendment, expiration or termination of this
Agreement.
5. INDEMNITY
HENAN
shall indemnify and hold harmless ARMCO from and against any loss, damage,
obligation and cost arising out of any litigation, claim or other legal
procedure against ARMCO resulting from the operation of the Business and the
consulting and services provided by HENAN under this Agreement.
6. EFFECTIVE
DATE AND TERM
6.1 This
Agreement shall be executed and come into effect as of the date first set forth
above. The term of this Agreement is ten (10) years, unless earlier terminated
as set forth in this Agreement.
6.2 This
Agreement shall be automatically renewed for additional ten (10) year periods
upon the expiration of the initial term hereof or any renewal term, unless this
Agreement has been previously terminated as provided herein.
7. TERMINATION
7.1 Early
Termination. During the initial term of this Agreement or any renewal
term, HENAN shall not have the right to terminate this Agreement.
Notwithstanding the above stipulation, ARMCO shall have the right to terminate
this Agreement at any time upon thirty days’ prior written notice to
HENAN.
7.2
Survival. Sections 4 and 5 shall survive after the termination or expiration of
this Agreement.
8. SETTLEMENT
OF DISPUTES
The
parties shall strive to settle any dispute arising from the interpretation or
performance in connection with this Agreement through friendly negotiation. In
case no settlement can be reached through negotiation, except as provided in
Section 2.3, each party can submit such matter to China International Economic
and Trade Arbitration Commission (the "CIETAC"). The arbitration shall follow
the current rules of CIETAC, and the arbitration proceedings shall be conducted
in English and shall take place in Hong Kong. The arbitration award shall be
final and binding upon the parties and shall be enforceable in accordance with
its terms.
9. FORCE
MAJEURE
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9.1 Force
Majeure, which includes acts of governments, acts of nature, fire, explosion,
typhoon, flood, earthquake, tide, lightning, war, means any event that is beyond
the party's reasonable control and cannot be prevented with reasonable care.
However, any shortage of credit, capital or finance shall not be regarded as an
event of Force Majeure. The affected party who is claiming to be not liable to
its failure of fulfilling this Agreement by Force Majeure shall inform the other
party, without delay, of the approaches of the performance of this Agreement by
the affected party.
9.2 In
the event that the affected party is delayed in or prevented from performing its
obligations under this Agreement by Force Majeure, only within the scope of such
delay or prevention, the affected party will not be responsible for any damage
by reason of such a failure or delay of performance. The affected party shall
take appropriate means to minimize or remove the effects of Force Majeure and
attempt to resume performance of the obligations delayed or prevented by the
event of Force Majeure. After the event of Force Majeure is removed, both
parties agree to resume performance of this Agreement with their best
efforts.
10. NOTICES
Notices
or other communications required to be given by any party pursuant to this
Agreement shall be written in English and shall be deemed to be duly given when
it is delivered personally or sent by registered mail or postage prepaid mail or
by a recognized courier service or by facsimile transmission to the address of
the relevant party or parties set forth below:
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ARMCO
& METAWISE (H.K.) LIMITED
Xxxx
0000, Xxxxx Resources Xxxxxxxx
00
Xxxxxxx Xxxx
Xxxxxxx,
Xxxx Xxxx
Fax:
____________________________
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HENAN
ARMCO & METAWISE TRADING CO., LTD.
Xx.
0000, 00 Xxxxx, Xx.0 Building
Xx.00
Xxxx Xxx Xxxx
Xxx
Xxxx Xxxxxxxx, Xxxxx Xxxx Xxxx, Xxxxx
Fax:
_______________________________
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11. NO
ASSIGNMENT OR SUBLICENSE BY THE LICENSEE
HENAN may
not assign their rights or obligations under this Agreement to any third party
without the prior written consent of the other party. ARMCO and may
assign its rights to this Agreement without the prior written consent of
HENAN.
12. SEVERABILITY
Any
provision of this Agreement that is invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that any other provision of this
Agreement invalid or unenforceable in any other jurisdiction.
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13. AMENDMENT
AND SUPPLEMENT
Any
amendment and supplement of this Agreement shall come into force only after a
written agreement in the English language is signed by both parties. The
amendment and supplement duly executed by both parties shall be part of this
Agreement and shall have the same legal effect as this Agreement.
14. GOVERNING
LAW
This
Agreement shall be governed by and construed in accordance with the PRC
laws.
15. LANGUAGE
This
Agreement is executed in English only, and the executed English language
Agreement shall prevail in all cases. This Agreement may be executed in
counterparts, each of which shall constitute one and the same agreement, and by
facsimile or electronic signature.
IN
WITNESS THEREOF, the parties hereto have caused this Agreement to be duly
executed on their behalf by a duly authorized representative as of the date
first set forth above.
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ARMCO
& METAWISE (H.K.) LIMITED
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chairman of the Board and General Manager
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HENAN
(LIANYUANGANG) SCRAPS CO., LTD.
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chairman of the Board and General
Manager
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SCHEDULE
A
DESCRIPTION
OF BUSINESS CONSULTING AND SERVICES
1. Providing
business consulting on the Business of HENAN;
2. Providing
business consulting on management, marketing, and business planning aspects of
HENAN’s Business;
3. Training
of managerial personnel;
4. Providing
performance guarantees of contracts, agreements and transactions executed by
HENAN related to its Business pursuant to written guarantee contracts separately
entered into between ARMCO with the other parties to HENAN’s contracts,
agreements and transactions as may be required from time to time by such parties
(“HENAN’s Obligations”); and
5. Providing
other business consultation and services that HENAN may reasonably
request.
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