Baotou Steel - General Steel Special Steel Pipe Joint Venture Agreement (Amendment) BAOTOU IRON & STEEL GROUP CO., LTD. TIANJIN DAQIUZHUANG METAL SHEET CO., LTD.
Baotou
Steel - General Steel
Special
Steel Pipe
(Amendment)
BAOTOU
IRON & STEEL GROUP CO., LTD.
TIANJIN
DAQIUZHUANG METAL SHEET CO., LTD.
1.
GENERAL PROVISIONS
1.1
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In
accordance with the Laws of the People’s Republic of China on Joint
Ventures Using Chinese and Foreign Investment (“Joint Venture Law”) and
other relevant published laws and regulations of China, the following
Parties hereby enter this initial joint venture agreement (“Agreement”)
with the intention of forming a joint venture
enterprise.
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2.
PARTIES TO THE JOINT VENTURE
2.1 |
Parties
to this Agreement are as follows:
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Party
A:
Tianjin Daqiuzhuang Metal Sheet Co., Ltd. (Daqiuzhuang Metal)
Located
at Daqiuzhuang, Jinghai county, Tianjin city, China;
Legal
Representative Yu,
Zuo Sheng
(Nationality: Chinese)
Party
B:
Baotou Iron & Steel Group Co., Ltd. (Baotou Steel)
Located
at River West Industrial Area, Kundulun District, Baotou city, Inner Mongolia,
China;
Legal
Representative:
Li, Ren Ming
(Nationality: Chinese)
3.
ESTABLISHMENT OF THE JOINT VENTURE
3.1 |
In
accordance with the Joint Venture Law and other relevant published
laws
and regulations of the People’s Republic of China, the Parties herein
hereby agree to establish a Joint Venture Limited Liability Company
(hereinafter referred to as "Joint Venture" or “JV”) in Inner Mongolia,
China.
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3.2
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The
name in English of the Joint Venture will be: Baotou Steel - General
Steel
Special Steel Pipe Joint Venture Company Limited. The legal address
of the
Joint Venture will be Kundulun District, Baotou city, Inner Mongolia,
China.
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3.3
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The
form of organization of the Joint Venture shall be a limited liability
company. The liability of each Party herein is limited to the capital
contribution to the registered capital in accordance with Section
5.2 of
this Agreement; including increases and decreases in each Party's
share of
ownership interest made in compliance with the regulations and laws
of the
People’s Republic of China.
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4:
PURPOSES, SCOPE AND SCALE OF PRODUCTION AND BUSINESS
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4.1 |
The
purposes of the Joint Venture will be, in conformity with the mutual
desire of each Party herein of strengthening economic cooperation
and
technical exchanges, to improve the product quality and the production
capacity, to develop new products and gain competitiveness in both
domestic and international markets in terms of quality, variety and
price
by adopting advanced technology in the production of steel products,
and
the adoption of advanced management methods, so as to constantly
raise
economic results and ensure satisfactory economic benefits for each
Party.
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4.2 |
The
products of the Joint Venture shall be those classified as special
steel.
At the first stage of JV, the products are special steel pipes. The
products shall be sold in both domestic and international markets.
The
total production scale of the Joint Venture will be 600,000 metric
tons a
year.
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5:
TOTAL INVESTMENT, REGISTERED CAPITAL AND OWNERSHIP
5.1 |
The
total amount of investment is 50,000,000 RMB (approximately $6,400,000
USD).
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5.2
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The
registered capital is 50,000,000 RMB (approximately $6,400,000
USD).
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Party
A
shall contribute 40,000,000 RMB (approximately $5,130,000 USD).
Party
A
shall have 80% ownership interest.
The
investment shall be used for purchasing equipment necessary to create four
pipe
production lines and working capital.
Party
B
shall contribute 10,000,000 RMB (approximately $1,270,000 USD).
Party
B
shall have 20% ownership interest.
The
investment shall be used for purchasing land, setting up new workshops and
buildings, establishing power and water systems and creating an accessing
road.
5.3
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Scope
of Investment:
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Party
A:
The payments to be made by Party A toward the registered capital of the Joint
Venture must be paid as follows:
a.
20,000,000 RMB (approximately $2,558,000 USD) of its capital contribution used
to purchase equipment necessary to create the four production lines at the
date
of approval of Joint Venture;
b.
8,000,000 RMB (approximately $1,023,000 USD) of its capital contribution at
the
date 30 days from the approval of the Joint Venture;
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c.
8,000,000 RMB (approximately $1,023,000 USD) of its capital contribution at
the
date 3 months from the approval of the Joint Venture; and
d.
The
remainder of its capital contribution at the date 6 months from the approval
of
the Joint Venture.
Party
B:
The full payment of its contribution must be paid at the date of the approval
of
Joint Venture.
5.4
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After
the registered capital is paid in full by both Parties herein, an
accounting firm registered in China appointed by both Parties will
verify
that all contributions cited in this Agreement have been made in
accordance with the terms and conditions of this Agreement. The accounting
firm will issue a verification report stating that all contributions
according to this Agreement Parties have been made in full by both
Parties
herein. Based on the verification report, the Joint Venture shall
issue an
investment certificate to each Party herein. This report will be
signed by
both the Chairman of the Board of Directors and the Vice Chairman
of the
Board of Directors of the Joint
Venture.
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5.5 |
Should
either Party herein desire to assign all or part of its interest
in the
Joint Venture to a third Party, written approval must be obtained
from the
following entities: the other Party herein, the Joint Venture Board
of
Directors; and the appropriate government approval authority. In
the event
of a transfer of interest by either Party herein in this Agreement,
the
other Party herein will have a preemptive right over the shares to
be
transferred. If a transfer is made to a third party, the terms for
the
transfer shall not be superior to those for the Parties herein. Any
transfer deviating from the specifications of this Agreement shall
be
deemed invalid. Any transfer of interest must be reported to the
appropriate local government authority for approval.
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6:
RESPONSIBILITIES OF THE PARTIES
6.1 |
Responsibilities
of the Party A:
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a.
Making
capital contributions in accordance with term 5.2, 5.3;
b.
Assisting Party B to obtain the business approval, registration and business
license;
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c.
Assisting Party B to obtain the various government related benefits eligible
to
companies qualified to participate in the “Advantages of Developing the Western
Territory” government program; and
d.
Preparing all relevant documents for local government approval.
6.2 |
Responsibilities
of Party B:
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a.
Making
capital contributions in accordance with term 5.2. 5.3;
b.
Assisting Party A to obtain the business approval, registration and business
license;
c.
Providing sufficient raw materials, water, electricity, gas, transportation
and
other services for the Joint Venture (A contract with respect to the supply
of
raw materials, air, water, electricity and gas shall be signed separately by
the
both Parties herein.);
d.
Providing sufficient land for the JV operation (A land lease agreement for
20
years shall be signed by both parties.).
7.
PRODUCTION AND SALES OF PRODUCTS
7.1 |
Party
A will provide the equipment necessary for creating four special
pipe
production lines;
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7.2 |
Party
A will provide the production technology and the government production
permission approval by the relevant authority;
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7.3 |
The
products of the Joint Venture will be sold primarily in the domestic
market. Each Party herein will assist in a good faith effort to expand
sales to the international market.
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8:
BOARD OF DIRECTORS
8.1 |
The
Board of Directors will be established at the date of issuance
of the
business license.
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8.2 |
The
Board of Directors will consist of seven ( 7) directors of which
five (5)
will be appointed by Party A and two ( 2 ) shall be appointed by
Party B.
The Chairman of Board will be appointed by Party A. The Vice Chairman
of
the Board shall be appointed by Party B. The term of the directors
is four
(4) years. This term of office may be renewed upon reappointment
by the
appointing Party herein.
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8.3 |
The
highest authority of the Joint Venture shall be its Board of Directors.
It
will decide all important issues concerning the Joint Venture.
In handling
all important matters, the Board of Directors will reach its decision
through consultation among the participants in the principle of
equality
and mutual benefit. All issues of the Joint Venture brought before
the
Board of Directors for consideration and vote will require a two-thirds
majority assent for approval.
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8.4 |
The
following important issues will require the unanimous approval
of the
Board of Directors:
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a.
Amendment of the Articles of Incorporation of the Joint Venture;
b.
Termination and dissolution of the Joint Venture;
c.
An
increase of the registered capital of the Joint Venture and any
transfer
of ownership interest by any Party herein; and
d.
Merger
of the Joint Venture with another economic organization.
8.5 |
The
Chairman of the Board is the legal representative of the Joint
Venture. If
the Chairman of the Board is unable to exercise his or her
responsibilities, he or she will authorize the Vice Chairman of
the Board
of Directors to be the legal represent the Joint
Venture.
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8.6 |
The
Board of Directors will convene at least two (2) meetings each
year. The
meetings shall be called and presided over by the Chairman of the
Board.
The General Manager of the Joint Venture and the Vice General Managers
of
the Joint Venture may attend the meetings, but have no voting rights.
The
meetings can be held at a site mutually agreed upon by the Parties
herein.
The Chairman of the Board may convene interim meetings based on
proposal
made by more than one third of the directors. The minutes of all
meetings
will be kept on file. The directors will have the right to be represented
by a designated representative. One (1) union representative can
attend
the meetings, but has no voting
rights.
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8.7 |
A
decision signed by all the members of the Board of Directors has
the same
validity as a decision made during an official Board of Directors
meeting.
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9:
BUSINESS MANAGEMENT ORGANIZATION
9.1 |
The
Joint Venture shall establish a management office which will be
responsible for the daily operation and management of the entity.
The
management office shall have one (1) General Manager, three (3) Vice
General Managers and one (1) Chief Financial Officer.
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Party
A
will appoint the General Manager;
Party
A
will appoint the Chief Financial Officer;
Party
A
will appoint two (2) Vice General Mangers; and
Party
B
will appoint one (1) Vice General Manager.
9.2 |
The
office is authorized by Board of Directors. The term of office shall
be
four (4) years.
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9.3 |
The
responsibilities of the General Manager will be to carry out the
decisions
of the Board of Directors and to organize and direct the daily management
of the Joint Venture in accordance with the provisions of this Agreement
and the Articles of Incorporation.
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9.4 |
The
Vice General Managers will assist the General Manager in his or her
duties.
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9.5 |
The
department managers will be responsible for the work in the respective
departments of production, technology, business operation, finance
and
administration. Department managers will handle matters delegated
by the
General Manager and the Vice General Managers and will be accountable
to
them. The General Manager will prepare and present for approval to
the
Board of Directors a yearly budget, including proposed appointments
of
department managers as well as their remunerations.
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9.6 |
The
General Manager and Vice General Managers will not serve as employees
of
other entities, and will not serve or act on behalf of other economic
entities in competition with the Joint Venture except that they may
be an
officer, director or employee of their respective Party herein.
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9.7 |
The
Board of Directors will have the power to dismiss the General Manager
and
the Vice General Managers in the event of behavior in violation of
the
laws of the People’s Republic of China or serious dereliction of
duty.
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10:
LABOR MANAGEMENT
10.1
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Policies
relating to matters such as, but not limited to, the total number
of
employees, recruitment, dismissal, wages, welfare, benefits, labor
insurance, bonuses and labor discipline will be determined by the
management office in accordance with “Labor Management Laws and Provisions
of Foreign Invested Enterprises Provisions Laws of People’s Republic of
China”, and other regulations and policies stipulated by the Board of
Directors of the Joint Venture.
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10.2
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The
Joint Venture shall have the right to recruit and hire employees
directly
from any available sources in the Baotou Steel Union You Yi Alloy
Rod
Mill. In all cases, the Joint Venture will employ only those employees
who
are sufficiently qualified for employment, as determined through
tests
and/or examinations.
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10.3
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The
Joint Venture, acting through the General Manager, will sign individual
labor agreements with each employee. Each labor agreement, according
to
the framework duly approved by the Board of Directors, will include
the
type of work, the technical requirements and the wages of the employee.
The labor agreement for each employee will be filed for reference
at the
local labor management department.
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10.4
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The
labor agreements of employees who will likely in the course of their
routine work responsibilities have access to or receive confidential
information and/or particular training from the Joint Venture or
from
Party B will include, confidentiality clauses and non-competition
clauses
pursuant to which the employee will not be permitted to work for
an
enterprise or organization in the same field of operation as the
Joint
Venture for a period of two (2) years after leaving the employment
of the
Joint Venture.
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10.5
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The
employees of the Joint Venture will have the right to establish a
labor
union in accordance with relevant laws and regulations of People’s
Republic of China.
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11:
TAXES, FINANCE, AUDIT AND PROFIT DISTRIBUTION
11.1
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The
Joint Venture will pay various taxes in accordance with relevant
laws and
regulations of the People’s Republic of
China.
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11.2
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The
Joint Venture will prepare financial statements at the end of each
fiscal
year and at times as may be required by the Board of Directors. The
Joint
Venture will conduct inspections and verification according to the
related
laws and regulations of foreign invested enterprises in the People’s
Republic of China. Unless otherwise requested by the Board of Directors,
the fiscal year financial statements should be submitted to both
Parties
herein for review within the duration of April 1st
to
May 1st
of
each year.
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11.3
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Each
Party herein has the right to engage a professional outside entity
for the
purpose of auditing the financial records of the Joint Venture. The
costs
for the services of such outside entity are solely the responsibility
of
the initiating Party herein. The Joint Venture will not withhold
unreasonably cooperation from the outside
entity.
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11.4
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After
the Joint Venture distributes the after-tax profit of the current
year, it
will put ten percent (10%) of the profit into a legal accumulation
fund
and five percent (5%) of the profit into public welfare fund.
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When
the
Joint Venture operates at a financial loss, it must first cover the loss from
any profit of the previous year before it takes any money from the legal
accumulation fund and public welfare fund to cover its loss.
11.5
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Any
after-tax profit that exists after the above cited required
contributions
to the legal accumulation fund and the social welfare fund
will be
distributed to the Parties herein in proportion to the capital
contribution made by each Party
herein.
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11.6
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The
two Parties herein may also negotiate other profit distribution
methods.
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12:
DURATION OF THE JOINT VENTURE
12.1 |
The
duration of the Joint Venture will be 20 years. The date of establishment
of the Joint Venture will be the date of issuance of the business
license.
The duration of the Joint Venture can be prolonged if either Party
herein
submits a written proposal to the Board of Directors before six (6)
months
of the expiring date of the Agreement and it is approved by the Board
of
Directors.
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13:
DISPOSAL OF ASSETS UPON LIQUIDATION OF THE JOINT VENTURE
13.1 |
Upon
termination of the Joint Venture, liquidation of all assets will
be
carried out according to relevant laws and regulations of the People’s
Republic of China.
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13.2 |
The
Board of Directors will form a Liquidation Committee comprised of
members
representing both Parties herein. The Liquidation Committee will
conduct
all liquidation procedures in accordance with the relevant laws and
regulations of the People’s Republic of China.
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13.3 |
The
liquidated assets will be distributed, upon the discharge of all
liabilities of the Joint Venture, to the Parties herein in proportion
to
the capital contribution made by both Parties herein.
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13.4 |
Fees
incurred during the liquidation and the salaries for the Liquidation
Committee will be deducted from the residual
equity.
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13.5 |
All
original copies of documents, files, contracts and books and records
of
the Joint Venture will be kept by Party A after the
liquidation.
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14:
INSURANCE
14.1 |
The
types, value and duration of insurance will be decided by the Board
of
Directors in accordance with the relevant laws and regulations of
the
People’s Republic of China.
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15.
AMENDMENT, ALTERATION AND TERMINATION OF AGREEMENT
15.1
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Any
amendment to this Agreement or its appendices will come into force
only by
written agreement signed by both Parties herein and approved by the
original government examination and approval
authority.
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15.2
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Should
it become impossible to fulfill this Agreement as a result of force
majeure, or should it become impossible to continue the operations
of the
Joint Venture as a result of heavy losses sustained by the Joint
Venture
in successive years, the Joint Venture and this Agreement may be
terminated prior to the date of expiration if unanimously decided
by the
Board of Directors and approved by the original government examination
and
approval authority. The Joint Venture may be terminated prior to
its
expiration date in the event that both Parties herein agree that
termination of the Joint Venture is the mutual and the best interest
of
the Parties herein. The registration of the Joint Venture must then
be
canceled at the original government registration
office.
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15.3
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If
due to any one Party herein being unable to fulfill the obligations
of
this Agreement and the Articles of Incorporation, and if for that
reason
the Joint Venture cannot continue its normal business or cannot reach
its
target mentioned in the Agreement, then the Agreement would be deemed
to
have been stopped by the Party herein who made the violation. The
other
Party herein has the right to claim damages and to apply for the
termination of the Agreement. If the other Party herein agrees to
continue
the business, the Party which committed the violation should compensate
the economic damage. The other Party would have in that case a buying
option for the shares owned by the defaulting Party.
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16:
FORCE MAJEURE
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16.1 |
Should
the performance of this Agreement be directly affected or should
it become
impossible to perform this Agreement in accordance with the prescribed
terms as a result of a force majeure event such as earthquake, typhoon,
flood, fire, war, civil disorder, unforeseeable events where the
occurrences and consequences are unpreventable and unavoidable without
limitation, the Party herein affected by such event will notify the
other
Party herein by telegram or facsimile without any delay and, within
ten
(10) days thereafter, provide the detailed information of such event
and a
valid certification document giving reasons for such Party's inability
to
perform all or part of this Agreement or its delay of the
performance.
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16.2
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If
possible, the said document will be issued by a notary public office
at
the location where the force majeure event occurs. The Parties herein
will
decide through consultations whether to terminate this Agreement
or to
waive part of the obligations to be performed under this Agreement
or to
delay the performance of this Agreement according to the effects
of the
force majeure event on the performance of this
Agreement.
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17:
DISPUTE RESOLUTION
17.1
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Any
dispute arising from the execution of or in connection with this
Agreement
shall first be settled through friendly consultations between the
Parties
herein. In the event that no settlement can be reached through
consultations, the disputes will be submitted to the China International
Economic and Trade Arbitration Commission for arbitration. The
arbitration fees and related expenses occurred will be borne by the
losing
Party.
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17.2 |
When
the dispute, controversy or claim arising out of or in connection
with
this Agreement are being resolved either through friendly consultation
or
through arbitration, the Parties herein should take the interest
of the
whole into account and shall not hinder or affect the performance
of the
provisions other than in dispute, so as to guarantee the smooth operation
of the Joint Venture to the extent
possible.
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18:
EFFECTIVENESS OF CONTRACT
18.1 |
The
following appendices formulated in accordance with the principles
of this
Agreement shall be integral part of this Agreement:
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Appendix
1: Copies
of
business licenses of the Parties herein;
Appendix
2: Credit
certificates of the Parties herein;
Appendix
3: Identification
certificated of the legal representatives or
authorized persons of the Parties herein;
Appendix
4: Authorization
Proxy executed by the representatives of
each
Party herein;
Appendix
5: Board
of
Directors resolution for approval of the JV Agreement;
Appendix
6: Raw
Materials Contract; and
Appendix
7: Water,
Electricity, Gas and Transportation contracts.
18.2
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This
Agreement and its appendices will become effective subject to successful
purchase of the equipment necessary to create the four production
lines
and upon approval by the original government examination and approval
authority. The same applies in event of
amendment.
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18.3
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The
Parties herein will take all such efforts to carry out the purposes
of
this Agreement and its appendices. Neither Party herein will take
any
action that might have an adverse competitive effect or adverse
consequence on the operation of the Joint
Venture.
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19:
Others
19.1 |
Any
amendment to this Agreement will be approved by Board of Directors
and
submitted to the original government examination and approval
authority.
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19.2 |
This
contract is in eight (8) originals, each Party herein receiving two
(2)
originals, the rest will be used for government authority approval
and
registration of the Joint Venture.
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19.3 |
In
witness whereof, the Parties herein have signed this Agreement on
________
by their duly authorized representatives in Inner Mongolia,
China.
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19.4 |
The
right of interpretation belongs to the Board of Directors of the
Joint
Venture.
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Party
A:
Tianjin Daqiuzhuang Metal Sheet Co., Ltd. (Daqiuzhuang Metal)
Legal
representative:
Date:
Party
B:
Baotou Iron & Steel Group Co., Ltd. (Baotou Steel)
Legal
representative:
Date:
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