APPENDIX 4
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EQUIPMENT CONTRIBUTION CONTRACT
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by
and
between
BAODING FENGFAN GROUP LIMITED LIABILITY COMPANY
and
VALENCE TECHNOLOGY, INC.
EQUIPMENT CONTRIBUTION CONTRACT
THIS EQUIPMENT CONTRIBUTION CONTRACT (this "Contract") is made as of this
8th day of July, 2003 between Baoding Fengfan Group Limited Liability Company,
established under the laws of the People's Republic of China ("PRC"), having
legal address at 0 Xxxxxxx Xxxx, Xxxxxxx Xxxx, Xxxxx Xxxxxxxx, PRC ("Party A")
and Valence Technology, Inc., a corporation organized under the laws of the
State of Delaware, and having registered address at 000 Xxxxxxxxx Xxx,
Xxxxxxxxx, Xxxxxx, 00000 Xxxxxx Xxxxxx of America ("USA") ("Party B").
(Party A or Party B alone may be referred to as a "Party," and together may
be referred to as the "Parties.")
PRELIMINARY STATEMENT
This Contract is the Equipment Contribution Contract to be used for Party
B's contribution of equipment to the registered capital of Baoding
Fengfan-Valence Battery Co., Ltd., a Chinese-foreign equity joint venture
company to be established by the Parties (the "Joint Venture Company"). Such
contribution is made in accordance with Article 32 of the Joint Venture Contract
dated as of July 8, 2003 by and between Party A and Party B, concerning the
establishment and operation of the Joint Venture Company (the "Joint Venture
Contract"). In addition, Party B and the Joint Venture Company shall enter into
certain separate agreements for Party B's transfer of technology to the Joint
Venture Company associated with the Joint Venture Company's acquisition of
equipment from Party B (the "Contract for Technology Investment").
ARTICLE I
DEFINITIONS
1.01. Bellcore(LCO) Cells and Bellcore(P1a) Cells. As used herein
"Bellcore(LCO) Cells" and "Bellcore(P1a) Cells" shall have the meaning set forth
in the Joint Venture Contract signed between Party A and Party B.
1.02 CONTRIBUTED EQUIPMENT. As used herein the term "Contributed Equipment"
shall mean those items listed in ATTACHMENT 1 attached hereto and incorporated
herein by reference.
1.03 PRODUCTION STARTUP. As used herein the term "Production Startup" shall
mean the date that all Contributed Equipment, together with all other equipment
that may be required for completion of a production line, has been installed and
debugged in the Joint Venture Company's production facility to be constructed in
Baoding, PRC.
ARTICLE II
SHIPMENT, SALE AND INSTALLATION OF EQUIPMENT
2.01. SHIPMENT AND SALE OF EQUIPMENT. The terms of contribution of the
equipment
will be ex works (EXW) (as defined in Incoterms 2000) at the current location of
each such listed equipment. Equipment shipping from Party B's Northern Ireland
Facility will be EXW 00 Xxxxxxx Xxxx, Xxxxxx Xxxxx, Xxxxxxxx Xxxxxxx BT368PZ,
United Kingdom ("Mallusk Facility"). Equipment shipping from Party B's
Development facility will be EXW 000 Xxxxxxxxx Xxx, Xxxxxxxxx, XX 00000 and
equipment shipping from Party B's wharehouse facility in New Jersey will be EXW
such warehouse location in New Jersey. The respective responsibilities of Party
B and the Joint Venture Company shall be governed by such terms. Notwithstanding
the terms of EXW, title and ownership of the Contributed Equipment shall remain
in Party B as delineated in 2.02 below. Party B shall pay or reimburse the Joint
Venture Company all costs in connection with the transportation, packaging,
shipment and insurance of the Contributed Equipment to arrival at port in China.
2.02. TITLE, OWNERSHIP. ETC. Title and ownership of the Contributed
Equipment shall remain in Party B until the issuance of a capital verification
report by an authorized accountant in China confirming Party B's contribution of
such equipment to the registered capital of the Joint Venture Company. Risk of
loss of the Contributed Equipment shall remain in Party B only until such time
as the Contributed Equipment has been effectively placed at the disposal of the
Joint Venture Company in Party B's plant, in the Mallusk Facility.
2.03. INSTALLATION AND STARTUP OF EQUIPMENT. The Joint Venture Company
shall be responsible for the installation of the Contributed Equipment at its
facility in Baoding, PRC. Party B shall assist the Joint Venture Company in the
installation, set-up and debugging of the Contributed Equipment as contracted by
the Joint Venture Company. For this purpose, the Joint Venture Company will use
competent persons and will prepare such facility to receive the Contributed
Equipment, including without limitation having available all necessary
electrical, lighting and ventilation and connections for required electrical
power, compressed air, gas and water. The costs of such installation and
preparation will be borne by the Joint Venture Company. Party B shall provide
certain training and technical services pursuant to the Technology Investment
Contract. Party B also shall be responsible to provide a complete list of the
Contributed Equipment, technical drawings of the Contributed Equipment, drawings
and manuals for the installation of the production line and other information
materials that are related to the installation and start-up of the Contributed
Equipment.
2.04. VALUE OF CONTRIBUTED EQUIPMENT
(a) Subject to the terms of this Contract, the total value of the
Contributed Equipment shall be Eight Million Sixteen Thousand United States
Dollars (US$8,016,000).
(b) Party B shall be deemed to have contributed Eight Million Sixteen
Thousand United States Dollars (US$8,016,000) to the registered capital of the
Joint Venture Company upon the issuance of a capital verification report by an
authorized accountant in the PRC confirming Party B's contribution of equipment
in such amount. Subject to consent by Party B, contributions of the Contributed
Equipment may be verified in batches.
(c) If the Contributed Equipment is appraised pursuant to PRC laws and
regulations, the market value method shall be used if possible, and no
references shall be made to the current book value of the Contributed Equipment,
which may reflect factors unrelated to the actual value of the Equipment, such
as accelerated depreciation for tax
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purposes.
(d) The agreed value of each piece of the Contributed Equipment is set
forth in ATTACHMENT 1 hereto and incorporated herein by reference.
ARTICLE III
PARTY B'S WARRANTIES
3.01. PARTY B'S WARRANTIES.
(a) Party B warrants that the Contributed Equipment, which is of an
advanced level in the industry, will conform to the descriptions set forth in
this Contract and that the same shall be debugged by Party B under the
supervision of a representative of the Joint Venture Company and delivered to
the Joint Venture Company free and clear of all liens, encumbrances and security
interests of third Parties.
(b) Party B warrants that each of the Contributed Equipment shall
operate steadily and shall not malfunction during a twenty-four (24) hour test
period;
(c) Party B warrants that the Contributed Equipment shall be free of
major mechanical or design defects and that Party B shall be responsible for
remedying any such major mechanical or design defect that arises during the
first six (6) months of operation. The Joint Venture Company shall be
responsible for the maintenance and normal wear of the Contributed Equipment
resulting from the normal and intended use of the Contributed Equipment.
(d) In addition, Party B warrants that the Contributed Equipment, when
used together with all other equipment that may be required for completion of a
production line, is capable of achieving the following targets when operated and
maintained properly and consistently:
(i) a cumulative process yield from film to completion of the
final Bellcore(LCO) Cells or Bellcore(P1a) Cells of 70%;
(ii) the final Bellcore(LCO) Cells or Bellcore(P1a) Cells shall
not have greater than 2% failure rate after completion of quarantine and final
testing; and
(iii) a production capacity of 220,000 kg/yr of Powder(P1a), 100
million Whrs of P1a cathode film, and 25 million Whr/yr of Bellcore(LCO) Cells
or Bellcore(P1a) Cell.
(e) Party B shall have no further obligations regarding the production
and output of the Contributed Equipment upon demonstration of the targets
herein.
(f) Party B's warranties and liabilities under this Contract shall at
all times be subject to and limited by the relevant corresponding terms of the
Technology Investment Contract.
3.02. REMEDY. Subject to the Joint Venture's Right to return contributed
equipment in accordance with Articles 4.02(d) and 4.03 hereof, Party B's
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sole liability, and Party A's and the Joint Venture Company's exclusive remedy,
with respect to any matter relating to or in any way connected with this
Contract and the transaction contemplated hereby, the Contributed Equipment or
with respect to a breach of Party B's warranty contained in Article 3.01 above,
shall be limited to Party B repairing or replacing (at Party B's option), within
a commercially reasonable period of time from the date that notice is given, at
Party B's own cost and expense, any items of non-conforming Contributed
Equipment.
ARTICLE IV
VERIFICATION OF EQUIPMENT
4.01. METHOD OF VERIFICATION. For purposes of verifying Party B's
warranties in Articles 3.01(b) and (c) above, verification shall be carried out
as follows:
(a) The Contributed Equipment shall operate for twenty-four (24) hours
steadily and without malfunction following Production Startup;
(b) One thousand (1000) cells shall be produced by the Contributed
Equipment operating steadily and without malfunction following Production
Startup; and
(c) Verification personnel shall confirm that production of such one
thousand (1000) cells conforms to Party B's warranties in Article 3.01(d)
hereof.
4.02 METHOD OF ACCEPTANCE.
(a) If the Contributed Equipment is verified according the preceding
procedure, representatives of Party A and Party B shall sign a verification
certificate.
(b) If the Contributed Equipment fails such verification procedure,
the Joint Venture Company shall investigate the reasons for the failure, take
any required measures and organize a second verification. If the Contributed
Equipment passes a second verification procedure conducting according to Article
4.01 hereof, representatives of Party A and Party B shall sign a verification
certificate.
(c) If the Contributed Equipment fails such second verification
procedure, the operation of such equipment shall be halted, and Party B, with
the assistance of Joint Venture Company, shall investigate the reasons for the
failure, take any required measures and organize a third verification. If any
piece of the Contributed Equipment must be replaced, Party B shall replace such
piece. If the Contributed Equipment passes the third verification procedure
conducted according to Article 4.01 hereof, representatives of Party A and Party
B shall sign a verification certificate.
(d) If any piece of the Contributed Equipment fails the third
verification procedure, then following consultation between Party A, Party B and
the Joint Venture Company, the Joint Venture Company shall return the piece of
equipment which failed to Party B and Party B shall refund the purchase price
for such piece, together with shipping charges.
(e) Verification certificates signed as indicated above shall be
provided to
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Party A, Party B and the Joint Venture Company, and shall be effective evidence
that the Contributed Equipment has passed verification and is accepted by the
Joint Venture Company.
4.03 UNUSED EQUIPMENT. If any piece of Contibuted Equipment remains unused
for a continuous six (6) month period within two (2) years of Production
Startup, the Joint Venture Company shall return such piece of equipment to Party
B and Party B shall refund the purchase price for such piece, together with
shipping charges.
ARTICLE V
EFFECTIVE DATE AND TERMINATION
5.01. EFFECTIVE DATE. This Contract shall become effective after it is
approved by the Examination and Approval Authority, as such term is defined in
the Joint Venture Contract.
5.02. TERMINATION.
(a) Party B shall have the right to terminate this Contract if the
Contributed Equipment is appraised according to the requirements of PRC laws or
regulations, the total appraised value varies more than 10% from the value
agreed by the Parties as set forth in Article 2.04(a) hereof, and within thirty
(30) days of the issuance of the relevant appraisal the Parties do not agree to
any other resolution. All Contributed Equipment shall be returned to Party B if
this Contract is terminated pursuant to this provision, and the Parties shall
also use their best efforts to terminate the Joint Venture Contract.
(b) This Contract shall terminate if the Joint Venture Contract is
terminated.
ARTICLE VI
APPLICABLE LAW AND SETTLEMENT OF DISPUTES
6.01. APPLICABLE LAW. In accordance with Article 126 of the CONTRACT LAW OF
THE PEOPLE'S REPUBLIC OF CHINA, the parties hereto have agreed that this
Contract shall be governed by, and interpreted in accordance with, the laws of
the State of California, United States of America, excluding its rules governing
conflicts of laws. The 1980 United Nations Convention on the International Sale
of Goods is hereby expressly disclaimed.
6.02. FRIENDLY CONSULTATIONS. In the event of any dispute, controversy or
claim (collectively, "Dispute") arising out of or relating to this Contract, or
the breach, termination or invalidity thereof, the Parties shall attempt in the
first instance to resolve such Dispute through friendly consultations.
6.03. ARBITRATION. Any Dispute between the parties relating to the
validity, performance, construction or interpretation of this Contract that
cannot be resolved amicably between the parties shall be submitted to binding
arbitration in Singapore under the auspices of the Singapore International
Arbitration Centre in accordance with the rules of that Centre for the time
being in force. The arbitration shall be conducted as follows:
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(i) There shall be three (3) arbitrators, one (1) of whom shall be
appointed by Party B, one (1) of whom shall be appointed by the
Joint Venture Company, and (1) of whom shall be appointed by the
arbitration tribunal.
(ii) Any arbitration proceeding under this Article shall be conducted
in English.
(iii)After each Party has been afforded a reasonable opportunity to
present written and testimonial evidence in support of its
position in any such arbitration proceeding, the arbitrators
shall issue their decision and award, which shall (i) be in
writing, stating the reasons therefor, (ii) be final and binding
upon the parties. Any arbitration award under this Article may be
enforced in any court of competent jurisdiction.
(iv) The prevailing Party in any proceeding brought by one Party
against the other Party arising out of or in connection with this
Contract shall be entitled to recover its legal expenses,
including reasonable attorney's fees.
6.04. CONTINUING RIGHTS AND OBLIGATIONS. When any Dispute occurs and when
any Dispute is under arbitration, except for the matters under dispute, the
Parties shall continue to exercise their other respective rights and fulfil
their respective obligations under this Contract.
6.05. ENFORCEMENT OF AWARD. In any arbitration proceeding, any legal
proceeding to enforce any arbitration award and in any legal action between the
parties pursuant to or relating to this Contract, each Party expressly waives
the defense of sovereign immunity and any other defense based on the fact or
allegation that it is an agency or instrumentality of a sovereign state.
ARTICLE VI
MISCELLANEOUS
7.01. INDEPENDENT CONTRACTOR. In the exercise of their respective rights,
and the performance of their respective obligations under this Contract, the
parties are, and shall remain, independent contractors. Nothing in this Contract
shall be construed (i) to constitute the parties as principal and agent,
partners, joint venturers, or otherwise as participants in a joint undertaking,
or (ii) to authorize either Party to enter into any contract or other binding
obligation on the part of the other Party hereto.
7.02. WAIVER. The waiver by either Party to this Contract of any breach of
any term, covenant or condition herein contained shall not be deemed to be a
waiver of such term, covenant or condition or any subsequent breach of the same
or any other term, covenant or condition herein contained.
7.03. NOTICES. All notices, reports and other communications between the
parties shall be in writing and sent by registered air mail, postage prepaid and
return receipt requested, or by courier service delivered mail, or by facsimile
with a confirmation copy sent by registered air mail or courier service
delivered mail to the address set forth at the beginning of this Contract or to
other addresses as the parties may designate by written notice from time to
time. The date of receipt of a notice, report, or other communication hereunder
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shall be deemed to be seven (7) days after the letter is given to the courier
service or postal service, or one (1) working day after sending in the case of a
facsimile, provided it is evidenced by a confirmation receipt and the
confirmation letter is sent by courier service or postal service.
Party A: Baoding Fengfan Group Limited Liability Company
Address: Xx. 0 XxXxxxx Xxxx, Xxxxxxx Xxxx, Xxxxx Xxxxxxxx, PRC
Facsimile: (0000) 0000000
Attention: Chairman of the Board
Party B: Valence Technology, Inc.
Address: 000 Xxxxxxxxx Xxx, Xxxxxxxxx, Xxxxxx, 00000 X.X.X.
Facsimile: (000) 000-0000
Attention: General Counsel
All notices and communications between the Parties shall be in the English
language.
7.04. CAPTIONS. The subject headings of this Contract are included for
purposes of convenience only, and shall not affect the construction or
interpretation of any provision of this Contract.
7.05. INTEGRATION AND MODIFICATION. This Contract contains the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes all previous negotiations, commitments and writings. No modification
or amendment to this Contract shall be binding upon the Parties unless in
writing and executed by the duly authorized representative of each of the
Parties. The use by either Party of Purchase Orders, Change Orders, Sales
Orders, Sales Order Acknowledgments or the like shall not be deemed to modify
this Contract or add to the terms hereof but shall only be for the purpose of
confirming quantities, shipment dates or similar matters.
7.06. NON-DISCLOSURE.
(a) During the term of the Joint Venture Contract and for a period of
five (5) years thereafter, Party A and the Joint Venture Company agree that they
will keep confidential any information which they learn from Party B regarding
the design or operation of the Contributed Equipment (the "Information"),
provided that the foregoing restriction shall not apply to any of the
Information which becomes part of the public domain other than by the acts of
(i) Party A or the Joint Venture Company, (ii) any of the persons or entities to
whom the Joint Venture Company is permitted to disclose the Information as
hereinafter provided, or (iii) any officers, directors or employees of Party A
or the Joint Venture Company. Party A and the Joint Venture Company shall use
all reasonable efforts to procure that their officers, directors and employees
(other than persons who are employees of Party B or its affiliated companies)
shall abide by and conform to the foregoing restriction and in addition will not
use the Information for any purpose (except that employees of the Joint Venture
Company may use the Information in connection with the business of the Joint
Venture Company). Notwithstanding the foregoing, the Joint Venture Company may
disclose the Information to persons or entities with which it contracts for the
installation or repair of its Contributed Equipment to the extent that such
disclosure is necessary, provided such persons or entities shall first have
executed written undertakings requiring them and their officers, directors and
employees to maintain the Information in confidence and not to use it
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for purposes other than those for which they were retained.
(b) Simultaneously with the execution and delivery of this Contract,
the Joint Venture Company shall sign and deliver to Party B a letter in the form
of ATTACHMENT 2 hereto.
7.07. TAXES. The parties shall do their best to minimize the customs duties
and other taxes payable with respect to the Contributed Equipment. Any and all
taxes, including custom duties, value-added taxes, and stamp taxes (other than
taxes levied on Party B outside of the PRC, in connection with this Contract)
shall be borne by the Joint Venture Company.
7.08. SUCCESSORS AND ASSIGNS. The covenants, conditions and agreements
contained in this Contract shall bind and inure to the benefit of Party B and
the Joint Venture Company and their respective successors and assigns, provided
that this Contract may not be assigned by either Party without the prior written
consent of the other Party.
7.09. LANGUAGE. This Contract is written and signed in the Chinese language
in six (6) originals and in the English language in six (6) originals. Both
language versions shall be equally authentic and valid. All communications
between the parties related to this Contract shall be conducted in the English
language.
IN WITNESS WHEREOF, the Parties hereto have caused this Contract to be duly
executed on their behalf the year and day first hereinabove written.
PARTY A:
BAODING FENGFAN GROUP LIMITED LIABILITY COMPANY
/s/ [Chinese Characters]
By ----------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman and President
PARTY B:
VALENCE TECHNOLOGY, INC.
/s/ Xxxxx Xxxxxxxxx
By: ---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President Worldwide Operations
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