Management Entrustment Agreement
This Agreement is made and entered into on November 8, 2006 in Xi'an City,
China, by and between the following parties:
PARTY A: Xi'an Amorphous Alloy Zhongxi Transformer Co., Ltd
Registered business address: Xxx Xxxx Industry Tower, Xx.0 Xxx Xx Xxxx, Xxx
Xxxxxxxx, Xx'xx Xxxx
Legal representative: Yongxing Song
PARTY B: An Sen (Xi'an) Power Science & Technology Co., Ltd.
Registered business address: Xx.00 Xxxxxx 0 Xxxx, Xx-xxxx Industries Development
Zone, Xi'an. P. R. of China
Legal representative: Xxxxxx Xxxx
WHEREAS:
1. Party A is a joint stock limited company registered in Xi'an Shaanxi
Province, and legally existing to date. The number of its business license is
6101001401860.
2. Party B is a foreign investment enterprise incorporated and registered in
Xi'an City, Shaanxi Province, People's Republic of China, and legally existing
to date. The number of its business license is: Qi Du Xxxxx Xi'An Zong Zi Di No.
002433
3. In light of Xi'An Amorphous Alloy Science & Technology Co., Ltd, Party A's
real owner, intention to go public at OTCBB in the United States through Party
B's parent company, China Power Equipment Inc, ("China Power" hereinafter, a US
company registered in Maryland), in order to let Party B have actual control of
Party A and realize the consolidation of financial statements, Party A intends
to irrevocably entrust to Party B for its management the right of operation
management of Party A and the responsibilities and authorities of the
shareholders' meeting and the board of directors of Party A.
4. Party B agrees to accept the entrustment of Party A, and to exercise the
right of operation management of Party A and the responsibilities and
authorities of the shareholders' meeting and the board of directors of Party A.
5. Party A has obtained the approval of its shareholders' meeting to enter into
this Agreement.
NOW, THEREFORE, through friendly consultation, under the principle of equality
and mutual benefits, in accordance with the relevant laws and regulations of the
People's Republic of China, the parties agree to enter into this Agreement and
to be bound with the terms and conditions as follows:
Article 1 Entrusted Operation
1.1 Party A agrees to irrevocably entrust the right of operation management of
Party A and the responsibilities and authorities of Party A's
shareholders' meeting and the board of directors to Party B in accordance
with the terms and conditions of this Agreement. Party B agrees to
exercise the aforesaid rights and responsibilities in accordance with the
terms and conditions of this Agreement.
1.2 The term of the entrusted operation is from the effective date of this
Agreement to the earliest date of the following:
1) The termination date of Party A's business; or
2) The termination date of the entrusted operation as agreed upon by
the parties under this Agreement; or
3) The date on which Party B possesses more than 51% of Party A's
shares.
1.3 The purpose of the entrusted operation is: Before Party B possesses the
controlling stock (more than 51%) of Party A, Party B shall be in charge
of the normal business operations of Party A and perform the
responsibilities and rights of Party A's shareholders' meeting and the
board of directors, and Party A shall pay its profit (if any) to Party B
and Party B shall be responsible to Party A's loss (if any). During the
term of the entrusted operation, Party B, as the entrusted manager, shall
provide full management to Party A's operations.
1.4 The contents of the entrusted operation shall include but not limited to
the following:
1) Party B shall be in charge of all aspects of Party A's operations;
nominate and replace the members of Party A's board of directors,
engage Party A's management staff and decide their compensation.
2) Party B shall manage and control all the funds of Party A. The
account of Party A shall be managed and decided solely by Party B.
The seals and signatures for such account shall be the seals and
signatures of the personnel appointed and confirmed by Party B. All
the cash of Party A shall be kept in this entrusted account shall be
handled through this account, including but not limited to receipt
of all Party A's business income, current working capital, recovered
account receivables, etc., and the payment of all account payables
and operation expenses, employee salaries and asset purchases, etc.
3) All the matters of Party A, including internal financial management,
day-to-day operation, external contact execution and performance,
tax filing and payment, change of rights and personnel, etc., shall
be controlled and managed by Party B in all aspects.
4) Party B shall enjoy all the other responsibilities and rights
enjoyed by Party A's shareholders' meeting in accordance with the
Company Law and the articles of association of Party A, including
but not limited to the following:
a. Deciding Party A's operation principles and investment plan;
b. Discussing and approving the report of the board of directors;
c. Discussing and approving the report of the supervisor;
d. Discussing and approving the annual financial budget and
settlement plan;
e. Discussing and approving the profit distribution plan and the
loss compensation plan;
f. Resolving on the increase or decrease of the registered
capital;
g. Resolving on the issuance of the corporate bond;
h. Resolving on the matters including merger, division, change of
corporate form, dissolution and liquidation of the company;
i. Amending the articles of association;
j. Other responsibilities and rights provided by Party A's
articles of association.
5) Party B enjoys all the other responsibilities and rights enjoyed by
Party A's board of directors in accordance with the Company Law and
the articles of association of Party A, including but not limited to
the following:
a. Convening the shareholders' meeting and report to the
shareholders' meeting;
b. Executing the resolution of the shareholders' meeting;
c. Deciding the company's operation plan and investment scheme;
d. Composing the annual financial budget and settlement plan;
e. Formulating the profit distribution plan and the loss
compensation plan;
f. Formulating the plans regarding to the increase or decrease of
the registered capital and the issuance of the corporate bond;
g. Formulating the plans regarding to the matters including
merger, division, change of corporate form and dissolution of
the company;
h. Deciding on the establishment of the internal management
structure of the company;
i. Formulating the basic rules and regulations of the company;
j. Other responsibilities and rights provided by Party A's
articles of association
6) The said entrustment is irrevocable and shall not be withdrawn,
unless the Agreement is terminated.
1.5 The Fee of Entrusted Operation: For the performance of the entrusted
matters provided under this Agreement, Party A shall pay an entrustment
fee to Party B, which shall be Party A's total profit (if any) after
deduction of necessary expenses. If the net amount is zero or negative
after the aforesaid calculation, Party A shall not pay any entrustment
fee, and the loss of the given month shall be deducted in the following
months' entrustment fee. Party A and Party B shall calculate and settle
each month's entrustment fee payable by Party A within 10 days after the
end of that month.
1.6 The Assumption of the Entrustment Risk: Party B shall assume all the
operation risks in association with the management of Party A entrusted to
it. Party B shall be responsible for any loss incurred to Party A's
operation. If Party A's cash is not enough to pay its debt, Party B is
liable to pay the debt; if the loss leads to a net asset less than the
registered capital, Party B shall be liable to make up for the deficiency.
Article 2 Rights and Obligations of the Parties
2.1 During the term of the entrusted operation, the rights and obligations of
Party A shall include:
1) After the execution of this Agreement, the management of Party A
shall be handed over to Party B. Party A's board of directors shall,
within 5 days after the effective date of this Agreement, deliver
Party A's seals and financial materials (including but not limited
to balance sheet, profit and loss statement, cash flow statement and
any attachments, relevant right certificates and other proprietary
and operation documents) to Party B to ensure that Party B could
exercise its operation management rights in all aspects after taking
over the management of Party A and could set up financial records
accordingly;
2) During the term of the entrusted operation, without Party B's
consent, Party A and its shareholders' meeting and board of
directors shall not make any decision on Party A's operations, and
they shall not intervene with Party B's entrusted management
activities in any form;
3) During the term of the entrusted operation, Party A's board of
directors shall have the obligation to cooperate with Party B in
accordance with Party B's request to ensure the stability and
consistency of the operation;
4) To entrust the authorities of the shareholders' meeting and the
board of directors to Party B;
5) To timely pay the entrustment fee to Party B;
6) Without Party B's consent, Party A shall not entrust any third party
other than Party B in any form to manage Party A's businesses;
7) The board of directors and shareholders meeting of Party A shall
issue necessary documents for the purpose of accomplishing the
management by Party B;
8) Party A shall not unilaterally early terminate this Agreement for
any reason.
9) Other rights and obligations of Party A provided under this
Agreement.
2.2 During the term of the entrusted operation, the rights and obligations of
Party B shall include:
1) Party B shall enjoy independent and comprehensive management right
over Party A's operations;
2) Party B shall have the right to adjust the organizational structure
and the personnel placement of Party A based on the needs of the
management;
3) Party B shall have the right to dispose of all the assets on the
books of Party A on the execution day of this Agreement, and Party
can B dispose of any of the aforesaid assets without any prior
consent of Party A;
4) Party B shall be entitled to all of the Party A's income after
deducting necessary expenses.
5) Party B shall timely take over of Party A;
6) Party B shall carry out all the responsibilities and rights
entrusted to it under this Agreement in good faith and with honesty
and trustworthiness, and shall pay reasonable attention to the
entrusted matters and notify Party A timely of relevant matters;
7) Party B shall act in good faith and consult with Party A in regards
to the handling of matters not covered by this Agreement;
8) Other obligations shall be performed by Party B under this
Agreement.
Article 3 Warranties and Representations
Each party shall warrant and represent to the other party, on the execution day
of this Agreement, that:
1) Each party shall have the right to enter into this Agreement, and the
ability to perform this Agreement;
2) In order to execute and perform this Agreement, each party has gone
through the necessary internal decision-making procedures and obtained the
approval;
3) Each party has duly authorized its representative to execute this
Agreement;
4) Each party shall not have any reason of its own that will encumber the
effectiveness of this Agreement from the effective date and become binding
on such party;
5) The execution of this Agreement and the performance of the obligations
hereunder will NOT:
a) violate the business license, articles of association or any other
similar documents of that party;
b) violate the laws and regulations of China or the government
authorization or permit;
c) violate any other contracts or agreements to which that party is a
party (or is bound), or lead to that party's breach of contract
under such contracts or agreements.
Article 4 Effect of the Agreement
This Agreement shall be valid upon the subscription of both parties' legal
representatives or duly authorized representatives and the affixture of both
parties' corporate seals.
Article 5 Liability of Beach of the Agreement
After the effectiveness of this Agreement, apart from the situation described in
Article 6 of this Agreement, either party's violation of any provisions under
this Agreement shall constitute a breach of this Agreement and thus be liable to
compensate the non-breaching party for any damages that may arise thereof.
Article 6 Force Majeure
Either party's failure to perform the obligations or part of the obligations of
this Agreement due to a force majeure event shall not be deemed as a breach of
the agreement; however, the non-performing party shall timely provide effective
evidence of the force majeure event to the other party, and the parties shall
discuss a settlement plan through consultation.
Article 7 The Governing Law
The execution, effectiveness, interpretation, performance and dispute resolution
of this Agreement shall be governed by the laws and regulations of China.
Article 8 Dispute Resolution
Any dispute arising under this Agreement shall be first settled by the parties
through friendly consultation. If the dispute cannot be settled through
consultation, either party is entitled to submit the dispute to the people's
court that has jurisdiction over the dispute .
Article 9 Confidentiality
9.1 The parties agree and shall cause their relevant personnel to keep strict
confidence of all the terms and conditions of this Agreement and all the
matters of the entrusted operation that have access to. They shall not
disclose the aforesaid information to any third party unless it is
required by the explicit provision of law, or the instruction of judicial
or governmental agencies or with consent of the other party, otherwise,
the disclosing party shall bear the relevant legal consequences.
9.2 The confidentiality obligation of the parties shall survive the
termination of this Agreement.
Article 10 Severability of the Clauses
10.1 If any clause of this Agreement is invalidated or non-enforceable due to
the provisions of laws or regulations, this clause is invalid while all
other clauses shall remain in full force and effect and binding upon both
parties.
10.2 In the event the aforesaid situation occurs, the parties shall, through
friendly consultation, agree upon supplemental clause to replace the
invalid clause at their earliest possible time.
Article 11 Non-waiver of Rights
11.1 If one party fails or delays to exercise a certain right provided under
this Agreement, such failure or delay shall not constitute the waiver of
such right by that party.
11.2 If one party fails to require the other party to perform a certain
obligation provided under this Agreement, such failure shall not
constitute the waiver by that party of the right to require the other
party to perform at a later time.
11.3 If one party violates any clause of this Agreement and obtains a waiver of
liability from the non-violating party, such waiver shall not constitute
the waiver of liability by the non-violation party over the violations by
the other party at a later time or of other clauses of this Agreement.
Article 12 No Transfer
Unless otherwise provided in this Agreement, without the prior written consent
of the other party, one party shall not transfer or entrust this Agreement or
any right or obligation under this Agreement to a third party, nor shall one
party provide any guarantee to a third party or do other similar things.
Article 13 Miscellaneous
13.1 Any supplemental agreements entered into by the parties after the
effective date of this Agreement shall be an effective part of this
Agreement and have the same legal effect as this Agreement. If there is
any discrepancy between the supplemental agreement and this Agreement, the
supplemental agreement shall prevail.
13.2 This Agreement is written in Chinese This Agreement is executed in six
official copies, each party shall have two official copies and the
remaining shall be retained for the government procedure purpose.
13.3 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on this date first above written.
(NO CONTEXT BELOW)
(SIGNATURE PAGE)
PARTY A: Xi' an Amorphous Alloy Zhongxi Transformer Co., Ltd
Legal representative:
(or authorized representative)
PARTY B: An Sen (Xi'an) Power Science & Technology Co., Ltd.
Legal representative:
(or authorized representative)
