Management Entrustment Agreement
This Agreement is entered into on April 18, 2006 in Xi'an City, China, between
the following parties:
PARTY A: Shaanxi Xxx Xxxxx Centennial Agriculture and Technology Joint Stock
Co., Ltd. Registered business address: 0/X, Xxxxxxxxx Xxxxx, 00 Xxx Xxx Xxxx,
Xx'xx Xxxx Legal representative: Xxxxx Xxxx
PARTY B: Mei Xin Agricultural Technology (Shaanxi) Co., Ltd.
Registered business address: 2/F, Xxxxx 000, Xxxxxxxx Xxxxx, 00 Xxx Xxx Xx Xxxx,
Xxx Xin Qu, Xi'an City
Legal representative: Xxxxxx Xxxx
WHEREAS:
1. Party A is a joint stock limited company registered in Xi'an Shaanxi, and
legally existing to date. The number of its business license is 6100001011656.
2. Party B is a foreign investment enterprise incorporated and registered in
Xi'an City, Shaanxi Province, People's Republic of China, and legally existing
to date. The number of its business license is: Qi Du Xxxxx Xi'An Zong Zi Di No.
002333
3. In light of Party A's intention to go public at OTCBB in the United States
through Party B's parent company, China Agri-business, Inc. ("China Agri"
hereinafter, a US company registered in Maryland), in order to let Party B have
actual control of Party A and realize the consolidation of financial statements,
Party A intends to entrust to Party B for its management the right of operation
management of Party A and the responsibilities and authorities of the
shareholders' meeting and the board of directors of Party A.
4. Party B agrees to accept the entrustment of Party A, and to exercise the
right of operation management of Party A and the responsibilities and
authorities of the shareholders' meeting and the board of directors of Party A.
5. Party A has obtained the approval of its shareholders' meeting to enter into
this Agreement.
NOW, THEREFORE, through friendly consultation, under the principle of equality
and mutual benefits, in accordance with the relevant laws and regulations of the
People's Republic of China, the parties agree to enter into this Agreement and
to be bound with the terms and conditions as follows:
Article 1. Entrusted Operation
1.1 Party A agrees to irrevocably entrust the right of operation
management of Party A and the responsibilities and authorities of
Party A's shareholders' meeting and the board of directors to Party B
in accordance with the terms and conditions of this Agreement. Party B
agrees to exercise the aforesaid rights and responsibilities in
accordance with the terms and conditions of this Agreement.
1.2 The term of the entrusted operation is from the effective date of this
Agreement to the earliest date of the following:
-1-
1) The termination date of Party A's business; or
2) The termination date of the entrusted operation as agreed upon by
the parties under this Agreement; or
3) The date on which Party B possesses more than 51% of Party A's
shares.
1.3 The purpose of the entrusted operation is: Before Party B possess the
controlling stock (more than 51%) of Party A, Party B shall be in
charge of the normal business operations of Party A and perform the
responsibilities and rights of Party A's shareholders' meeting and the
board of directors, and Party A shall pay its profit (if any) to Party
B and Party B shall be responsible to Party A's loss (if any). During
the term of the entrusted operation, Party B, as the entrusted
manager, shall provide full management to Party A's operations.
1.4 The contents of the entrusted operation include but not limited to the
following:
1) Party B shall be in charge of all aspects of Party A's
operations; nominate and replace the members of Party A's board
of directors, engage Party A's management staff and decide their
compensation.
2) Party B shall manage and control all the funds of Party A. The
account of Party A shall be managed and decided solely by Party
B. The seals and signatures for such account shall be the seals
and signatures of the personnel appointed and confirmed by Party
B. All the cash of Party A shall be kept in this entrusted
account shall be handled through this account, including but not
limited to receipt of all Party A's business income, current
working capital, recovered account receivables, etc., and the
payment of all account payables and operation expenses, employee
salaries and asset purchases, etc.
3) All the matters of Party A, including internal financial
management, day-to-day operation, external contact execution and
performance, tax filing and payment, change of rights and
personnel, etc., shall be controlled and managed by Party B in
all aspects.
4) Party B enjoys all the other responsibilities and rights enjoyed
by Party A's shareholders' meeting in accordance with the Company
Law and the articles of association of Party A, including but not
limited to the following:
a. Decide Party A's operation principles and investment plan;
b. Discuss and approve the report of the board of directors;
c. Discuss and approve the report of the supervisor;
d. Discuss and approve the annual financial budget and
settlement plan;
e. Discuss and approve the profit distribution plan and the
loss compensation plan;
f. Resolve on the increase or decrease of the registered
capital;
g. Resolve on the issuance of the corporate bond;
h. Resolve on the matters including merger, division, change of
corporate form, dissolution and liquidation of the company;
i. Amend of the articles of association;
j. Other responsibilities and rights provided by Party A's
articles of association.
5) Party B enjoys all the other responsibilities and rights enjoyed
by Party A's board of directors in accordance with the Company
Law and the articles of association of Party A, including but not
limited to the following:
-2-
a. Convene the shareholders' meeting and report to the
shareholders' meeting;
b. Execute the resolution of the shareholders' meeting;
c. Decide the company's operation plan and investment scheme;
d. Compose the annual financial budget and settlement plan;
e. Formulate the profit distribution plan and the loss
compensation plan;
f. Formulate the plans regarding to the increase or decrease of
the registered capital and the issuance of the corporate
bond;
g. Formulate the plans regarding to the matters including
merger, division, change of corporate form and dissolution
of the company;
h. Decide on the establishment of the internal management
structure of the company;
i. Formulate the basic rules and regulations of the company;
j. Other responsibilities and rights provided by Party A's
articles of association
6) The entrustment above referenced is irrevocable and cannot be
withdrawn, unless the Agreement is terminated.
1.5 The Fee of Entrusted Operation: For the performance of the entrusted
matters provided under this Agreement, Party A shall pay an
entrustment fee to Party B, which shall be Party A's total profit (if
any) after deduction of necessary expenses. If the net amount is zero
or negative after the aforesaid calculation, Party A shall not pay any
entrustment fee, and the loss of the given month can be deducted in
the following months' entrustment fee. Party A and Party B shall
calculate and settle each month's entrustment fee payable by Party A
within 20 days after the end of that month.
1.6 The Assumption of the Entrustment Risk: Party B shall assume all the
operation risks in association with the management of Party A
entrusted to it. Party B shall be responsible for any loss incurred to
Party A's operation. If Party A's cash is not enough to pay its debt,
Party B is liable to pay the debt; if the loss leads to a net asset
less than the registered capital, Party B shall be liable to make up
for the deficiency.
Article 2. Rights and Obligations of the Parties
2.1 During the term of the entrusted operation, the rights and obligations
of Party A include:
1) After the execution of this Agreement, the management of Party A
shall be handed over to Party B. Party A's board of directors
shall, within 5 days after the effective date of this Agreement,
deliver Party A's seals and financial materials (including but
not limited to balance sheet, profit and loss statement, cash
flow statement and any attachments, relevant right certificates
and other proprietary and operation documents) to Party B to
ensure that Party B could exercise its operation management
rights in all aspects after taking over the management of Party A
and could set up financial records accordingly;
-3-
2) During the term of the entrusted operation, without Party B's
consent, Party A and its shareholders' meeting and board of
directors shall not make any decision on Party A's operations,
and they shall not intervene with Party B's entrusted management
activities in any form;
3) During the term of the entrusted operation, Party A's board of
directors has the obligation to cooperate with Party B in
accordance with Party B's request to ensure the stability and
consistency of the operation;
4) To entrust the authorities of the shareholders' meeting and the
board of directors to Party B;
5) To timely pay the entrustment fee to Party B;
6) To actively assist Party B to obtain the Commitment Confirmation
from all shareholders regarding to the transfer of shares to
Party B;
7) Without Party B's consent, Party A shall not entrust any third
party other than Party B in any form to manage Party A's
businesses;
8) The board of directors and shareholders meeting of Party A shall
issue necessary documents for the purpose of accomplishing the
management by Party B;
9) Party A shall not unilaterally early terminate this Agreement for
any reason.
10) Other rights and obligations of Party A provided under this
Agreement.
2.2 During the term of the entrusted operation, the rights and obligations
of Party B include:
1) Party B enjoys independent and comprehensive management right
over Party A's operations;
2) Party B has the right to adjust the organizational structure and
the personnel placement of Party A based on the needs of the
management;
3) Party B has the right to dispose of all the assets on the books
of Party A on the execution day of this Agreement, and Party can
B dispose of any of the aforesaid assets without any prior
consent of Party A;
4) Party B is entitled to all of the Party A's income after
deducting necessary expenses.
5) Party B shall timely take over of Party A;
6) Party B shall carry out all the responsibilities and rights
entrusted to it under this Agreement in good faith and with
honesty and trustworthiness, and shall pay reasonable attention
to the entrusted matters and notify Party A timely of relevant
matters;
7) Party B shall act in good faith and consult with Party A in
regards to the handling of matters not covered by this Agreement;
8) Other obligations shall be performed by Party B under this
Agreement.
Article 3. Warranties and Representations
Each party warrants and represents to the other party, on the execution day of
this Agreement, that:
1) Each party has the right to enter into this Agreement, and has
the ability to perform this Agreement;
2) In order to execute and perform this Agreement, each party has
gone through the necessary internal decision-making procedures
and obtained the approval;
3) Each party has duly authorized its representative to execute this
Agreement;
-4-
4) Each party does not have any reason of its own that will encumber
the effectiveness of this Agreement from the effective date and
become binding on such party;
5) The execution of this Agreement and the performance of the
obligations thereunder will NOT:
a) violate the business license, articles of association or any
other similar documents of that party;
b) violate the laws and regulations of China or the government
authorization or permit;
c) violate any other contracts or agreements to which that
party is a party (or is bound), or lead to that party's
breach of contract under such contracts or agreements.
Article 4. Effect of the Agreement
This Agreement is effective upon the signature of both parties' legal
representatives or duly authorized representatives and the affixture of both
parties' corporate seals.
Article 5. Liability of Beach of the Agreement
After the effectiveness of this Agreement, apart from the situation described in
Article 9 of this Agreement, either party's violation of any provisions under
this Agreement shall constitute a breach of this Agreement and is thus liable to
compensate the non-breaching party for any damages that may arise thereof.
Article 6. Force Majeure
Either party's failure to perform the obligations or part of the obligations of
this Agreement due to a force majeure event shall not be deemed as a breach of
the agreement; however, the non-performing party shall timely provide effective
evidence of the force majeure event to the other party, and the parties shall
discuss a settlement plan through consultation.
Article 7. The Governing Law
The execution, effectiveness, interpretation, performance and dispute resolution
of this Agreement shall be governed by the laws and regulations of China.
Article 8. Dispute Resolution
Any dispute arising under this Agreement shall be first settled by the parties
through friendly consultation. If the dispute cannot be settled through
consultation, either party is entitled to submit the dispute to China
International Economic and Trade Arbitration Commission for arbitration in
Beijing. The arbitration award shall be final and binding on both parties.
Article 9. Confidentiality
9.1 The parties agree and shall cause their relevant personnel to keep
strict confidence of all the terms and conditions of this Agreement
and all the matters of the entrusted operation that have access to.
They shall not disclose the aforesaid information to any third party
unless it is required by the explicit provision of law, or the
instruction of judicial or governmental agencies, or with consent of
the other party, otherwise, the disclosing party shall bear the
relevant legal consequences.
-5-
9.2 The confidentiality obligation of the parties shall survive the
termination of this Agreement.
Article 10. Severability of the Clauses
10.1 If any clause of this Agreement is invalidated or non-enforceable due
to the provisions of laws or regulations, this clause is invalid while
all other clauses shall remain in full force and effect and binding
upon both parties.
10.2 In the event the aforesaid situation occurs, the parties shall,
through friendly consultation, agree upon supplemental clause to
replace the invalid clause at their earliest possible time.
Article 11. Non-waiver of Rights
11.1 If one party fails or delays to exercise a certain right provided
under this Agreement, such failure or delay does not constitute the
waiver of such right by that party.
11.2 If one party fails to require the other party to perform a certain
obligation provided under this Agreement, such failure does not
constitute the waiver by that party of the right to require the other
party to perform at a later time.
11.3 If one party violates any clause of this Agreement and obtains a
waiver of liability from the non-violating party, such waiver does not
constitute the waiver of liability by the non-violation party over the
violations by the other party at a later time or of other clauses of
this Agreement.
Article 12. No Transfer
Unless otherwise provided in this Agreement, without the prior written consent
of the other party, one party shall not transfer or entrust this Agreement or
any right or obligation under this Agreement to a third party, nor shall one
party provide any guarantee to a third party or do other similar things.
Article 13. Miscellaneous
13.2 Any supplemental agreements entered into by the parties after the
effective date of this Agreement shall be an effective part of this
Agreement and have the same legal effect as this Agreement. If there
is any discrepancy between the supplemental agreement and this
Agreement, the supplemental agreement shall prevail.
13.3 This Agreement is written in Chinese This Agreement is executed in six
official copies, each party shall have two official copies and the
remaining shall be retained for the government procedure purpose.
13.4 IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on this date first above written.
(NO CONTEXT BELOW)
(SIGNATURE PAGE)
-6-
PARTY A: Shaanxi Xxx Xxxxx Centennial Agriculture and Technology Joint Stock
Co., Ltd.
Legal representative:
(or authorized representative)
PARTY B: Mei Xin Agricultural Technology (Shaanxi) Co., Ltd.
Legal representative:
(or authorized representative)
