EXHIBIT 10 (xxvii)
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SINO-FOREIGN EQUITY JOINT VENTURE CONTRACT
FOR
XXXXXX CHENGSHAN (SHANDONG) PASSENGER TIRE COMPANY LTD.
BY AND AMONG
SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES
AND
XXXXXX TIRE INVESTMENT HOLDING (BARBADOS) LTD.
AND
JOY THRIVE INVESTMENTS LIMITED
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OCTOBER 27, 2005
TABLE OF CONTENTS
CHAPTER PAGE
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CHAPTER 1 DEFINITIONS................................................. 1
CHAPTER 2 PARTIES TO THE CONTRACT..................................... 1
CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE.......................... 2
CHAPTER 4 PURPOSE, BUSINESS SCOPE AND SCALE OF THE JOINT VENTURE...... 3
CHAPTER 5 TOTAL INVESTMENT AND REGISTERED CAPITAL..................... 3
CHAPTER 6 REPRESENTATIONS AND WARRANTIES.............................. 5
CHAPTER 7 RESPONSIBILITIES OF THE PARTIES............................. 7
CHAPTER 8 BOARD OF DIRECTORS.......................................... 9
CHAPTER 9 OPERATION AND MANAGEMENT.................................... 13
CHAPTER 10 LABOR MANAGEMENT............................................ 15
CHAPTER 11 FINANCIAL AFFAIRS AND ACCOUNTING............................ 16
CHAPTER 12 PROFIT DISTRIBUTION......................................... 17
CHAPTER 13 TAXATION AND INSURANCE...................................... 18
CHAPTER 14 PURCHASE OF MATERIALS AND SALE OF PRODUCTS.................. 18
CHAPTER 15 CONFIDENTIALITY AND NON-COMPETE............................. 19
CHAPTER 16 DURATION, TERMINATION AND LIQUIDATION....................... 21
CHAPTER 17 BREACH OF CONTRACT.......................................... 26
CHAPTER 18 FORCE MAJEURE............................................... 26
CHAPTER 19 DISPUTE RESOLUTION.......................................... 26
CHAPTER 20 GOVERNING LAW & CHANGE OF LAW............................... 27
CHAPTER 21 EFFECTIVE DATE OF THE CONTRACT.............................. 28
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CHAPTER 22 MISCELLANEOUS PROVISIONS.................................... 28
APPENDIX 1 DEFINITIONS AND INTERPRETATION
APPENDIX 2 CAPITAL CONTRIBUTION SCHEDULE
APPENDIX 3 ASSET PURCHASE AGREEMENT
APPENDIX 4 AGREEMENT ON LABOR/PERSONNEL ISSUES
APPENDIX 5 OFFICE, SINGLE-WORKER DORMITORY AND
EMPLOYEE CAFETERIA LEASE AGREEMENT
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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) SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES, a company limited by
shares duly organized and existing under the laws of the PRC with its
legal address at Xx. 00, Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx Xxxx, Xxxxxxxx
Xxxxxxxx, PRC ("PARTY A");
(2) XXXXXX TIRE INVESTMENT HOLDING (BARBADOS) LTD., a company duly organized
and existing under the laws of Barbados with its legal address at
Xxxxxxxxx Xxxxx, Xxxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx ("PARTY B"); and
(3) JOY THRIVE INVESTMENTS LIMITED, a company duly organized and existing
under the laws of British Virgin Islands with its legal address at P.O.
Box 957, Offshore Incorporations Center, Road Town, Tortola, British
Virgin Islands ("PARTY C").
(Each party is hereinafter individually referred to as a "PARTY" and
collectively as the "PARTIES".)
In accordance with the principles of equality and mutual benefit, the Parties
have held friendly negotiations in relation to the terms and conditions for
establishing 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) Party A: Shandong Chengshan Tire Company Limited
by Shares
Country of Registration: PRC
Legal Address: Xx. 00, Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx
Xxxx, Xxxxxxxx Xxxxxxxx, PRC
Current Legal Representative: Che Hong-Zhi
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Nationality: Chinese
(2) Party B: Xxxxxx Tire Investment Holding
(Barbados) Ltd.
Country of Registration: Barbados
Legal Address: Xxxxxxxxx Xxxxx, Xxxxx Xxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxx
Current Legal Representative: Xxxxxx X. Xxxxxx
Nationality: U.S.A
(3) Party C: Joy Thrive Investments Limited
Country of Registration: British Virgin Islands
Legal Address: P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British
Virgin Islands
Current Legal Representative: Nuansir Sirisuwat
Nationality: Thailand
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 "Cooper Chengshan
(Shandong) Passenger Tire Company Ltd." The name of the Joint
Venture in Chinese is [CHINESE CHARACTERS]
(2) The legal address of the Joint Venture is Xx. 00, Xxxx Xxxxxxxx Xxxx
, Xxxxxxxxx Xxxx, Xxxxxxxx Xxxxxxxx, XXX.
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
according to Article 5.2 hereof. 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
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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.
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, BUSINESS SCOPE AND SCALE OF THE JOINT VENTURE
4.1 Purpose of Joint Venture. The purpose of the Joint Venture is to fully
initiate advantages of the Parties so as to enhance production technical
standard, to promote high quality products, to produce internationally
reputable products, to apply brand-new operation concept and management
method, to strengthen overall capacity and competitiveness in the
international market, to increase economic benefit, and to produce a
satisfactory return to all investors; meanwhile, to boost the industrial
level through an integration of the tire industry, to provide job
opportunities in the locale, to introduce more foreign capital to the
locale, and for sure to enhance the fast economic development in Rongcheng
City.
4.2 Scope of Business. The Joint Venture's scope of business shall be to
design, develop, manufacture, and sell half-steel radial passenger tires
and half-steel radial light truck tires; provide technical support and
services for such products.
4.3 Scale of Joint Venture. The tire manufacture volume of the Joint Venture
shall to the extent practicable increase by 10% per year over the next
three years. The Joint Venture shall from time to time introduce and
utilize the international modern technology and management expertise to
fully activate investment benefits.
CHAPTER 5 TOTAL INVESTMENT AND REGISTERED CAPITAL
5.1 Total Investment and Registered Capital. The Total Investment of the Joint
Venture shall be United States Dollars ninety-nine million
(US$99,000,000). The Registered Capital of the Joint Venture shall be
United States Dollars thirty-three million (US$33,000,000).
5.2 Capital Contributions. Subject to the Capital Contribution Schedule
attached as Appendix 2 hereto, each Party shall contribute to the
Registered Capital as follows:
(1) Party A shall contribute all of the land use rights and buildings
free of all liens and encumbrances to the Joint Venture, valued in
the amount of United States Dollars eleven million five hundred
fifty thousand (US$ 11,550,000), representing thirty five percent
(35%) of the Registered Capital;
(2) Party B shall contribute cash in the amount of United States Dollars
sixteen million eight hundred and thirty thousand (US$16,830,000),
representing fifty one percent (51%) of the Registered Capital; and
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(3) Party C shall contribute cash in the amount of United States Dollars
four million six hundred and twenty thousand (US$4,620,000),
representing fourteen percent (14%) of the Registered Capital.
5.3 Schedule for Capital Contributions. Subject to Article 5.4 below, the
Parties shall contribute their respective contributions to the Registered
Capital in accordance with the Capital Contribution Schedule attached as
Appendix 2 hereto.
5.4 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) 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; and
(2) 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.
5.5 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.
5.6 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.
5.7 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, any other Party or Parties shall have the option to make the
additional contribution to the Joint Venture's Registered Capital and the
ownership percentages of the Parties' equity in the Joint Venture shall be
adjusted accordingly.
5.8 Failure to Make Contributions to Registered Capital.
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(1) If any Party or Parties ("BREACHING PARTY(IES)") fails to make any
contribution to the Registered Capital within the period set forth
in Article 5.3 (the amount due and owing is referred to as the
"DEFAULT CAPITAL CONTRIBUTION"), the Breaching Party(ies) shall pay
the other Parties or Party (the "NON-BREACHING Party(ies)") (in
proportion to their Percentage Interests) a default penalty of 0.05%
per day based on the Default Capital Contribution from the first day
of the breach until the day on which the Default Capital
Contribution is contributed in full by the Breaching Party(ies).
(2) Notwithstanding the foregoing, if the Breaching Party(ies) fails to
make the Default Capital Contribution for more than 30 days, the
Non-Breaching Party(ies) shall have the right to determine, in
accordance with the applicable laws and regulations, to:
(i) make the additional contribution to satisfy the amount of the
Registered Capital of the Joint Venture, so as to increase the
Percentage Interest(s) of the Non-Breaching Party(ies) and
dilute the Percentage Interest(s) of the Breaching Party(ies)
accordingly; or
(ii) terminate this Contract in accordance with Article 16.2,
subject to the approval of the Examination and Approval
Authority.
(3) The provisions of this Article 5.8 shall not prejudice any other
rights or remedies the Non-Breaching Party(ies) may have under this
Contract or under applicable laws and regulations with respect to
the failure of the Breaching Party(ies) to contribute capital.
5.9 Transfer of Equity Interests. 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 Parties, and the transfer shall be presented to the
Examination and Approval Authority for approval.
5.10 Assets Transfer. On the date of this Contract, Party A and the Joint
Venture shall enter into an asset purchase agreement (the "ASSET PURCHASE
AGREEMENT") in substantially the form attached as Appendix 3 hereto for
any existing assets of Party A in respect of the business specified in
Article 4.2 hereof, as identified by the Joint Venture and Party A, to be
transferred to the Joint Venture.
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, and under the laws of
British Virgin Islands in the case of Party C;
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(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 or transfer assets 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 assets;
(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 Parties, 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 Party A's Assets. In respect
of Party A's existing assets relating to the business specified in Article
4.2 hereof, Party A represents, warrants and undertakes to Party B and
Party C, as of the date of this Contract and as of the Closing Date (as
such term defined in the Asset Purchase Agreement), those representations,
warranties and undertakings set forth in the Asset Purchase Agreement are
true and accurate in material way.
6.3 Cure and Indemnification Obligations.
(1) In case of any breach of the Contract by any Party, it shall, in
accordance with the direction of any non-breaching Party within
thirty (30) days after receiving a notice of such non-breaching
Party concerning any breach, take all necessary actions to cure such
breach.
(2) Each Party agrees to indemnify and hold the other Parties 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,
including reasonable attorneys' fees incurred in connection with the
enforcement of this Contract or the undertaking of any necessary
legal actions or responses involving any third parties.
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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 and the Capital Contribution Schedule
attached as Appendix 2 hereto;
(2) Using its best endeavors (acting at all times in close consultation
with Party B and Party C) 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 and Party C) 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 and Party C in foreign
exchange distributable profits and all other payments required to be
paid to Party B and/or Party C;
(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) Assisting foreign workers, staff, and personnel (including
Directors, managers, technicians, and contractors appointed or
selected by Party B and/or Party C) 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 and/or Party C;
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(7) Causing Chengshan Group to enter into the lease agreements in
substantially the form attached as Appendix 5 hereto in respect of
the office space, single-worker dormitories and employee cafeteria
with the Joint Venture, pursuant to which Chengshan Group, at the
discretion and request of the Joint Venture, shall lease the office
space, single-worker dormitory and employee cafeteria to the Joint
Venture as necessary for normal and effective use and operation of
the Joint Venture.
(8) Executing and performing, in accordance with the terms therein, the
various Supplementary Contracts to which it is a party;
(9) 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 Party A prior to the Establishment
Date; and
(10) 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 shall be responsible for the following matters:
(1) Providing capital contributions in accordance with the terms and
conditions of this Contract and the Capital Contribution Schedule
attached as Appendix 2 hereto;
(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;
(6) To the extent practicable, providing internationally advanced
technology to the Joint Venture; and
(7) Assisting with and carrying out other relevant matters requested by
the Joint Venture from time to time.
7.3 Responsibilities of Party C. In addition to its other obligations under
this Contract, Party C shall be responsible for the following matters:
(1) Providing capital contributions in accordance with the terms and
conditions of this Contract and the Capital Contribution Schedule
attached as Appendix 2 hereto; and
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(2) Assisting with and carrying out other relevant matters requested by
the Joint Venture from time to time.
7.4 Execution of Supplementary Contracts. Before the Establishment Date, the
Parties may jointly sign the Supplementary Contracts on behalf of the
Joint Venture. After the Establishment Date, all Supplementary Contracts
signed by the Parties shall be ratified by the Board in accordance with
the procedures set forth herein and in the Joint Venture's Articles of
Association and formally executed by the legal representative of the Joint
Venture. Each Party shall be bound by the relevant Supplementary Contracts
to which it is a contracting party on his own behalf, provided that,
however, no Party shall incur any liability or assume any obligations
solely as a result of its signing of any Supplementary Contracts on behalf
of the Joint Venture before the Establishment Date.
7.5 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. Any significant
purchases (including purchases of raw materials but excluding Products) by
the Joint Venture from Party B or its Affiliates shall be sold by Party B
or its Affiliates to the Joint Venture at cost, unless otherwise agreed by
the Parties. The Vice General Manager or another member of the senior
management team nominated by Party A, and either the General Manager or
another member of the senior management team nominated by Party B shall
approve all related party purchases.
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 seven (7) Directors, of which two (2)
shall be appointed by Party A, four (4) shall be appointed by Party
B, and one (1) shall be appointed by Party C. 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
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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 B shall serve as Chairman of the Board,
and a Director appointed by Party A 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.
8.3 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 five (5) directors to
be in attendance for a quorum.
(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;
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(e) amalgamation or merger of the Joint Venture with any other
company, association, partnership or legal entity; and
(f) division or change in the form of legal organization of the
Joint Venture.
(4) The following matters require a decision by the Board supported by
the affirmative vote of two thirds (2/3) of the 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) overall macro business strategy;
(b) derivation from profit distribution plan set forth in Article
12;
(c) the Joint Venture's external guarantee;
(d) major assets disposal (defined as assets with a net book value
greater than Five Million United States Dollars
(US$5,000,000));
(e) selection of the External Financial Auditor with the
restriction that the selected Auditor must be one of the Big
Four; and
(f) approval of financial control and financial reporting /
accounting policies (must be in compliance with Chinese law
and applicable U.S. law)
(5) The Parties agree that all matters except those listed in Article
8.3(3) and Article 8.3(4) 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).
(6) 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.
(7) 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.
(1) Board meetings shall be held at least twice (2) 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.
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(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, the Vice Chairman or 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.
If after two attempts to convene Board meetings that are not
achieved due to the lack of a quorum, a Board meeting may be
convened with a simple majority of Directors (provided such policy
only applies to the face-to-face Board meetings).
(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 all Directors.
Such written Board resolutions may consist of several counterparts
in identical form each signed by one or more of the Directors. Such
written Board resolutions 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
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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 Operation Principle. The Joint Venture will through the technical exchange
of the Parties constantly boost production technical level to reach an
international modern level, including product design, manufacture process,
testing method, material recipe, quality standard and personnel training.
The Joint Venture will constantly exert efforts on technical reform based
on the current production equipment, in order to enhance capability of
product line and automatization, satisfy the technical requirement and the
needs to promote the product grade.
9.2 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 shall be appointed by the Board upon the
nomination of Party B and the Joint Venture Controller ("JV
CONTROLLER") shall be appointed by the Board upon the nomination of
Party A. 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
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by the General Manager and shall be 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.
9.3 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 9.3(5)(a)(1) below, and shall carry out the decisions
of the Board and General Manager.
(3) 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.
(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
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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 is unable to carry out his duties, the Vice
General Manager may serve as the acting General Manager until a new
General Manager or acting General Manager is appointed by the Board
upon the nomination of Party B in the next Board meeting convened in
accordance with Article 8.4 herein.
(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.
9.4 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).
CHAPTER 10 LABOR MANAGEMENT
10.1 Governing Principle. Matters relating to the recruitment, employment,
management, dismissal, resignation, wages, welfare benefits, subsidies,
labor insurance, social security and other matters concerning the staff of
the Joint Venture shall be determined by the Board in accordance with the
labor and social security laws and regulations 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 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
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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.
10.6 Agreement on Labor/Personnel Issues. The Parties shall, at the same time
of the execution of this Contract, enter into an agreement on
labor/personnel issues as attached as Appendix 4 hereto to provide for the
details of the labor personnel issues.
CHAPTER 11 FINANCIAL AFFAIRS AND ACCOUNTING
11.1 Business Plan and Financial Budget
The Parties have agreed on the procedure to make the annual business plan
and annual financial budget as follows: the Parties shall work together in
the manner of from bottom to the top and for the best interest of the
Joint Venture to establish the annual business plan and annual financial
budget to be submitted to the Board.
11.2 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 11.2 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 applicable
accounting rules and relevant PRC laws and regulations.
(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 US Dollars. Such statements shall include at least the
following: balance sheet, profit and loss statements, and cash flow
statement, and shall be kept and provided to each Party and to the
relevant authorities as required by relevant PRC accounting
regulations, and to Party B within ten (10) days following the close
of the quarter to which each of them relates to meet the relevant
U.S. reporting requirement.
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11.3 Auditing.
(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 11.3(2), it shall
bear the expenses incurred and the responsibility for the appointed
auditor in maintaining confidentiality of all the documents so
audited.
11.4 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.
11.5 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 each year.
The amount of dividend to be distributed in respect of any year shall be
25% (or such higher percentage as determined by the Board) of the Joint
Venture's net income after tax as reported in the audited annual financial
statements of the Joint Venture for the year as provided for in Article
11.5 above, but not to exceed the projected Free Cashflow of the Joint
Venture for the immediate
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following year. The projected Free Cashflow for the immediate following
year shall be the amount of surplus cash projected to be generated by the
Joint Venture in its ordinary course of business less any projected
capital expenditures for that immediate following year based on the Joint
Venture's operating budget as approved by the Board for that immediate
following year.
For fiscal years 2009, 2010 and 2011, a dividend in the amount of the
greater of (i) the amount calculated above; or (ii) 10% of the Joint
Venture's net income after tax as reported in the audited annual financial
statement will be distributed. In 2011, the Parties shall review and agree
the methodology of the amount of dividend distribution for subsequent
fiscal years.
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 such dividend payment other than
the 10% dividend payable in fiscal years 2009, 2010 and 2011.
All dividends payable to Party B and Party C shall be paid in US$. The
Joint Venture shall bear any loss, gain or bank charges or other fees
associated with the dividends payment.
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.
13.3 Product Liability Insurance. The Joint Venture shall secure and will
maintain combined limits of twenty-five million U.S. dollars
(US$25,000,000.00) product liability insurance for each occurrence and
aggregate. Such insurance coverage shall name Xxxxxx and its Affiliates
which might be held liable for the Products of the Joint Venture as
additional insureds and such insurance shall not be subject to
cancellation without thirty (30) calendar days prior written notice to
Xxxxxx. A certificate of such insurance will be provided to Xxxxxx.
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.
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(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.
14.3 Sale of Xxxxxx Branded Products
The Parties hereby acknowledge that the Products to be produced by the
Joint Venture and branded with the trademarks belonging to Xxxxxx (the
"XXXXXX BRANDED PRODUCTS") will be merely sold to and distributed by
Xxxxxx or its Affiliates.
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 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
19
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.
(1) Party A 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, except as
otherwise provided in this Contract, during the period when it holds
any Interest in this Joint Venture and for a period of five (5)
years after it has ceased to hold any Interest in the Joint Venture,
provided, however, that Party A shall has the right to sell its
inventories under Customs control outside of China within nine (9)
months from the date of this Contract.
(2) Without prejudice to the terms and conditions under this Contract,
in the event that Party B or any of its Affiliates contemplates an
investment in Shandong Province in a half-steel radial passenger and
light truck tires manufacturing entity other than the Joint Venture
during the period of Party A or its permitted successor holding any
Interest of the Joint Venture, Party B or its said Affiliate will
consider and support in good faith and with every best effort the
opportunity for Party A or its permitted successor to participate in
such investment, subject to the following conditions that:
(a) Party B or its said Affiliate shall own majority percentage of
such investment;
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(b) Party A or its permitted successor shall use its own fund for
such investment;
(c) the extent of Party A or its permitted successor's
participation in such investment shall be agreed upon by Party
B or its said Affiliate, Party A or its permitted successor
and the said tire manufacturing entity where such investment
will be made; and
(d) the said investment of Party A or its permitted successor
shall originate from within the territory of China.
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 Parties if any of the following events occur:
(a) one or more of the conditions specified in Article 5.4 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, 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
Supplementary Contract to which the Party is a party or any of
its representations or warranties under said contract is or
becomes untrue in any material respect (the "EVENT OF
DEFAULT"), and has failed to remedy such Event of Default
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
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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 any 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 any 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 (except Party A) or becomes
unable to pay its debts as they come due so as to become
insolvent, in which case the relevant Party shall immediately
notify the other Parties 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) a majority of the members of the Board are unable to reach an
agreement on an annual operating plan, operating budget,
marketing and sales budget, financial budget, business and
sales performance targets 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 one hundred and twenty (120) 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(ies) shall have the option, but not the obligation, to buy out
the breaching Party's Percentage Interest in the Joint Venture 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, which value should not take into consideration the
values of the trademarks and technologies licensed by
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Xxxxxx to 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(ies) shall have the
option to purchase the breaching Party's share of the
Registered Capital of the Joint Venture at a price equal to:
Book Value x the breaching Party's share of the Registered
Capital at the time of valuation x 80%
If more than one non-breaching Party exercises its option,
each shall have the right to purchase a fraction of the
Interest of the breaching Party equal to its Percentage
Interest divided by the sum of the Percentage Interests of
both non-breaching Parties.
(c) The purchasing Party(ies) shall have the right to designate a
third party enterprise to purchase all or part of the
breaching Party's Percentage Interest for the price (or
portion thereof) set forth in Article 16.3(1)(b) hereof.
(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(ies) (or
its designee), the exercise of the option shall be null and
void and the Joint Venture shall be liquidated, if so proposed
by a 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(ies) 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 right, at its sole discretion, to
purchase the Percentage Interest(s) of Party A and/or Party C
at a price equal to the Book Value as determined by the
Auditor of such Percentage Interest(s) at the time x 80%,
which value should not take into consideration the values of
the trademarks and technologies licensed by Xxxxxx to the
Joint Venture. 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(s)
of Party A and/or Party C to Party B 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(s) is
duly approved by the Examination and Approval Authority and
registered with the
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Registration Authority. If Party B fails to exercise its right
to purchase the Percentage Interest of either Party A or Party
C, Party A and/or Party C 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 x 80%. To
exercise its right, Party A and/or Party C 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 and/or Party C 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 and/or Party C 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 A and Party C both
exercise their purchase options, each shall have the right to
purchase a fraction of the Interest of Party B equal to its
Percentage Interest divided by the sum of the Percentage
Interests of Party A and Party C.
(b) If no Party wishes to exercise its right to purchase the
Percentage Interest(s) of other Party(ies), 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.
(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 "Xxxxxx" 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(ies) 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 Asset Purchase Agreement is terminated under Article
5.3.1, Article 7.5.3, Article 10.2.1 or Article 12.4 thereof, or by
a court or arbitration order, or the date which is 30-day prior to
expiration of the Joint Venture Term.
24
(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 B and one (1) of whom shall be recommended by Party A and
Party C. 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.
(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 Parties 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
(failing such approval, simply majority approval by the Board),
appoint a certified public accounting firm 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 the copies of such books and documents shall
be left in the care of Party B and Party C.
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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. Any breach of contract committed by any Party resulting in
the nonperformance of or inability to fully perform any Supplementary
Contract(s) shall be deemed a breach by such Party of this Contract.
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,
natural disasters such as acts of God, earthquake, windstorm and flood,
terrifying events such as war, terrorism, civil commotion, riot, blockade
or embargo, fire, explosion, off-stream or strike or other labor disputes,
epidemic and pestilence, material accident 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 Parties within
fourteen (14) days from the occurrence of the Force Majeure Event stating
in the details of such Force Majeure Event.
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 Parties 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 Parties in accordance with Article
16.2.
CHAPTER 19 DISPUTE RESOLUTION
19.1 Consultations and Arbitration. Any and all disputes, controversies or
claims (the "DISPUTE") arising out of or relating to the formation,
validity, interpretation,
26
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 Parties
written notice of a Dispute, then it shall be resolved exclusively and
finally by arbitration in Hong Kong at the Hong Kong International
Arbitration Center ("HKIC") in accordance with the arbitration rules of
the HKIC (the "HKIC 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. 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 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 Parties 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
27
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 or any
Supplementary Contracts, the terms of this Contract shall prevail.
21.2 Delivery. Party A shall promptly deliver to Party B and Party C 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 Asset Purchase Agreement and the other Supplemental
Contracts, 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
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: Xx. 00, Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx
Xxxx, Xxxxxxxx Xxxxxxxx, PRC
Tel: ( 00-000) 0000-000
Fax: (00-000) 0000-000
28
Attn: Zhang Jun-quan
Party B Address: Xxxxxxxxx Xxxxx, Xxxxx Xxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxx
Tel: (0-000) 0000-000
Fax: (0-000) 0000-000
Attn: Xxxxxx X. Xxxx
Party C Address: P.O. Box 957, Offshore Incorporations Center,
Road Town, Tortola, British Virgin Islands
Tel: (000) 0000-0000
Fax: (000) 0000-0000
Attn: Xxxx Xxxxx
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 among 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 nine (9) original counterparts,
each of which shall have equal effect in law.
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 Supplementary Contracts.
29
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: SHANDONG CHENGSHAN TIRE COMPANY
LIMITED BY SHARES
By:
-----------------------------------------
Name: Che Hong-Zhi
Title: Chairman of Board
Nationality: Chinese
PARTY B: XXXXXX TIRE INVESTMENT HOLDING
(BARBADOS) CO., LTD.
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized representative
Nationality: U.S.A.
PARTY C: JOY THRIVE INVESTMENTS LIMITED
By:
-----------------------------------------
Name: Xxxxxx Xxxx
Title: Authorized representative
Nationality: Hong Kong, China
30
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 "ASSET PURCHASE AGREEMENT" shall have the meaning ascribed to such term in
Article 5.10.
1.3 "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.
1.4 "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.
1.5 "BIG FOUR" means four internationally reputable accounting firms, such as,
Price Water Coopers, Deloitte, Ernst & Young, and KPMG.
1.6 "BOARD OF DIRECTORS" or "BOARD" means the board of directors of the Joint
Venture established in accordance with this Contract.
1.7 "BOOK VALUE" means the historic accounting value of the equity of the
Joint Venture based on Chinese generally accepted accounting principles
(GAAP).
1.8 "BREACHING PARTY" shall have the meaning ascribed to such term in Article
5.8 hereof.
1.9 "BUSINESS LICENSE" means the business license of the Joint Venture as
issued, amended and replaced, as the case may be, from time to time by the
Registration Authority.
1.10 "CAPITAL CONTRIBUTION SCHEDULE" means a schedule set forth in Appendix 2
to this Contract, which schedule specifies the time and amount of
contribution by the Parties to the Registered Capital of the Joint
Venture.
1.11 "CHENGSHAN GROUP" means Chengshan Group Company LTD., a limited liability
company duly organized and existing under the laws of the PRC in Rongcheng
City, Shandong Province, which owns 73.76% equity interests of Party A.
31
1.12 "CERTIFICATE OF APPROVAL" means the certificate of approval issued by the
Examination and Approval Authority approving this Contract and the
Articles of Association.
1.13 "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 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.
1.14 "COOPER" means Xxxxxx Tire & Rubber Company or its relevant Affiliate,
which may license or cause to be licensed to the Joint Venture, the
technology in respect of the Products and Processes after duly
establishment of the Joint Venture.
1.15 "DAY" refers to a calendar day.
1.16 "DEFAULT CAPITAL CONTRIBUTION" shall have the meaning ascribed to such
term in Article 5.8(1).
1.17 "DIRECTOR" or "DIRECTOR OF THE JOINT VENTURE" means any member of the
Board.
1.18 "DISPUTE" shall have the meaning ascribed to such term in Article 19.1.
1.19 "EFFECTIVE DATE" means the date on which this Contract comes into effect
in accordance with Article 21.1.
1.20 "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.
1.21 "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.
1.22 "ESTABLISHMENT DATE" means the date on which the Joint Venture's first
Business License is issued by the Registration Authority.
1.23 "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.
32
1.24 "FAIR VALUE" means the transfer price of the equity interest of the Joint
Venture calculated by an internationally recognized accounting firm
jointly appointed by the Parties.
1.25 "FREE CASHFLOW" means the after-tax income less: (i) reserves provided for
the reserve, expansion, and bonus and welfare fund, (ii) capital spending,
(iii) working capital funding, and (iv) debt payment, and increased by:
(i) depreciation and amortization expenses, and (ii) any other non-cash
expenses included in the after-tax income.
1.26 "JOINT VENTURE" means Cooper Chengshan (Shandong) Passenger Tire Company
Ltd., the Sino-foreign equity joint venture limited liability company
established and operated by the Parties pursuant to this Contract.
1.27 "JOINT VENTURE TERM" shall have the meaning ascribed to such term in
Article 16.1 hereof.
1.28 "NET PASSENGER TIRE AND MIXING ASSETS" means the price agreed by the
Parties to pay for the passenger tire and mixing assets, net of allocated
debts and liabilities, of Party A.
1.29 "NON-BREACHING PARTY" shall have the meaning ascribed to such term in
Article 5.8(1) hereof.
1.30 "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.
1.31 "NOTIFYING PARTY" shall have the meaning ascribed to such term in Article
16.2(3).
1.32 "PERCENTAGE INTEREST" means, with respect to each Party, such Party's
percentage interest in the equity of the Joint Venture, as set forth in
Article 5.2.
1.33 "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.
1.34 "PRC" or "CHINA" means the People's Republic of China.
1.35 "PROCESSES" means the technical and working processes in respect of
producing and/or processing the Products.
1.36 "PRODUCTS" means half-steel radial passenger tires and half-steel radial
light truck tires.
1.37 "PROTECTED PARTY" shall have the meaning ascribed to such term in Article
15.1(1) hereof.
33
1.38 "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.
1.39 "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.
1.40 "RENMINBI" or "RMB" means the lawful currency of the PRC.
1.41 "REPRESENTATIVES" shall have the meaning ascribed to such term in Article
15.1(1) hereof.
1.42 "SUPPLEMENTARY CONTRACTS" shall mean the following: Asset Purchase
Agreement; Technical Assistance and Technology License Agreement; Real
Estate Lease Agreement.
1.43 "TERMINATION NOTICE" shall have the meaning ascribed to such term in
Article 16.2(3).
1.44 "TOTAL INVESTMENT" means the total amount of funds required to establish
and operate the Joint Venture in accordance with its business scope set
forth herein, as provided in Article 5.1 and as may be adjusted according
to the relevant provisions of this Contract and relevant PRC law.
1.45 "UNITED STATES DOLLARS" or "US$" means the lawful currency of the United
States of America.
1.46 "AND/OR" means that both cases apply, or either the first or the second
case applies.
1.47 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.
1.48 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.
34
JOINT VENTURE CONTRACT
APPENDIX 2
CAPITAL CONTRIBUTION SCHEDULE
1. The Total Investment of the Joint Venture shall be US$99,000,000.
2. The Registered Capital of the Joint Venture shall be US$33,000,000.
3. Immediately upon the satisfaction of the conditions specified in Article
5.4 herein:
(a) Party A will contribute land use rights and buildings valued at 35%
of the Registered Capital of the Joint Venture, payable to the Joint
Venture in exchange for a 35% ownership interest in the Joint
Venture.
(b) Party B will sign a promissory note for an amount equal to 51% of
the Registered Capital of the Joint Venture, payable to the Joint
Venture, in exchange for a 51% ownership interest in the Joint
Venture.
(c) Party C will sign a promissory note for an amount equal to 14% of
the Registered Capital of the Joint Venture, payable to the Joint
Venture, in exchange for a 14% ownership interest in the Joint
Venture.
4. As specified in Article 5.10 hereof, on the date of this Contract Party A
and the Joint Venture shall enter into the Asset Purchase Agreement
transferring certain identified assets to the Joint Venture from Party A
for the consideration as detailed in Article 3 of the Asset Purchase
Agreement..
5. Within ten (10) working days upon satisfaction of the conditions specified
in Article 5.4 hereof, Party B will contribute US$16,830,000 to the Joint
Venture satisfying the promissory note issued in step 3.(b) above.
6. Within ten (10) working days upon satisfaction of the conditions specified
in Article 5.4 hereof, Party C will contribute US$4,620,000 to the Joint
Venture satisfying the promissory note issued in step 3.(c) above.
35
JOINT VENTURE CONTRACT
APPENDIX 3
ASSET PURCHASE AGREEMENT (FOR THE ASSETS TO BE PURCHASED BY
THE JOINT VENTURE FROM PARTY A)
36
JOINT VENTURE CONTRACT
APPENDIX 4
AGREEMENT ON LABOR/PERSONNEL ISSUES
37
JOINT VENTURE CONTRACT
APPENDIX 5
OFFICE, SINGLE-WORKER DORMITORY AND EMPLOYEE CAFETERIA LEASE AGREEMENT
(TO BE ENTERED INTO BETWEEN CHENGSHAN GROUP AND JOINT VENTURE)
38
