ANNEX I
ASIA AUTOMOTIVE ACQUISITION CORPORATION
PERFORMANCE ORIENTED EARN-OUT AGREEMENT
This PERFORMANCE ORIENTED EARN-OUT AGREEMENT (the "Agreement"), is entered into
as of July 24, 2007 by and between ASIA AUTOMOTIVE ACQUISITION CORPORATION, a
public company in the United States ("Party A", or the "Company") and the
executives listed on Schedule A hereto ("Party B", or the "Executives"). The
Company and Executives are referred to collectively as the "Parties".
RECITALS
WHEREAS THE COMPANY SHALL EMPLOY THE EXECUTIVES FOR A PERIOD OF ONE (1) YEAR
STARTING FROM THE DATE OF THIS AGREEMENT, AND THE COMPANY AGREES TO PROVIDE
EARN-OUT SHARE PAYMENTS TO THE EXECUTIVES ACCORDING TO THE BUSINESS PERFORMANCE
OF Hunan TX Enterprise Co., Ltd. ("TX CHINA"), THE PARTIES AGREE AS FOLLOWS:
AGREEMENT
1. Issuance of Incentive Shares
(1) If the Company achieves or exceeds the Targeted After-
Tax Profit of the 2007 financial year (as defined in Article 2), the Executives
or the persons designated by the Executives shall receive, and AAAC shall issue
and deliver, two million (2,000,000) shares of the Company's common stock to the
Executives within 30 days following the date of filing of the audit of financial
statement for the 2007 financial year, with no consideration paid by the
Executives ("Incentive Shares");
(2) The Executives may distribute the Incentive Shares among them at their sole
discretion;
(3) In the event that the Company does not achieve the Targeted After-Tax Profit
for the 2007 financial year, the Company shall not issue any common stock to the
Executive with no consideration.
2. Targeted After-Tax Profit
The Company's Targeted After-Tax Profit for the 2007 financial year shall be
US$9,500,000 ("Targeted After-Tax Profit"). Such amount shall be exclusive of
all one time charges or expenses associated with the acquisition transaction
between the Company and TX China, including but not limited to US GAAP audit
fees, consulting fees, legal service fees, and non-cash expenses (if any)
incurred from the granting of 2,000,000 Incentive Shares, 4,500,000 shares of
employment stocks and 2,000,000 conditional shares as stipulated in the Key
Employees Employment Agreement to its key employees(the above fees, expenses and
all the shares issued to the key employees are collectively referred to as
"Transaction Expenses").
Targeted After-Tax Profit=FY2007 After-Tax Profit + Transaction Expenses "FY2007
After-Tax Profit" shall mean the consolidated after-tax profit of TX China and
its wholly owned subsidiaries audited in accordance with US GAAP for the 2007
financial year.
3. Disposal of the Incentive Shares
Each of the Executives, at his sole discretion, may receive the Incentive
Shares, and may assign, sell, transfer, delegate or otherwise dispose of, or
abandon the Incentive Shares issued to him.
4. Responsibilities of the Executives
Each of the Executives shall perform all services appropriate to that position
as well as such other services as may reasonably be assigned by the Company,
including serving in TX China. Each of the Executives shall devote his best
efforts and full time attention to the performance of his duties. The Executives
shall report to the Chief Executive Officer of the Company.
5. Termination of the Performance-Oriented Incentive
Within 30 days following the date of filing of the audit of financial statement
for the 2007 financial year, if one of Executives quits, his right to receive
the Incentive Shares shall be terminated when he ceases to be the Company's
employee. The other Executives' rights under this Agreement shall not be
adversely affected.
6. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
the People's Republic of China.
7. Dispute Resolution
(a) Any dispute, controversy or claim arising out of or relating to this
Agreement, or the interpretation, breach, termination or validity hereof, shall
be resolved through consultation. Such consultation shall begin immediately
after one Party hereto has delivered to the other Party hereto a written request
for such consultation. If within thirty (30) days following the date on which
such notice is given the dispute cannot be resolved, the dispute shall be
submitted to arbitration upon the request of any Party with notice to the
others.
(b) The arbitration shall be conducted in Hong Kong by the Hong Kong
International Arbitration Center in accordance with its arbitration rules then
in effect. The arbitration proceedings shall be conducted in Chinese.
(c) The award of the arbitration tribunal shall be final and binding upon the
disputing Parties, and any Party may apply to a court of competent jurisdiction
for enforcement of such award.
8. Successor
The Company will redomesticate and convert as Tongxin International Co., Ltd., a
company organized and validly existing under the laws of the British Virgin
Islands ("Successor"). This
Agreement shall be binding upon the Successor.
9. Miscellaneous
(1) Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original of this Agreement, but all of which together shall
constitute one and the same instrument.
(2) Language
This Agreement is written in English and Chinese languages. Both versions shall
be equally valid and binding.
The Parties have duly executed this Agreement as of the date first written
above.
COMPANY:
ASIA AUTOMOTIVE ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chairman of the Board
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx
Chief Executive Officer
EXECUTIVES (Signature)
EXHIBIT A
NAMES OF THE EXECUTIVES
August 21, 2007 Draft
