Exhibit 10.1
Baotou Steel - GSHI
Special Steel
Joint Venture Agreement
BAOTOU IRON & STEEL (GROUP) CO., LTD.
GENERAL STEEL INVESTMENT CO., LTD.
DA QIU ZHUANG METAL SHEET CO., LTD.
September 28, 2005
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JOINT VENTURE AGREEMENT
1. GENERAL PROVISIONS
1.1 In
accordance with the
Law of the People's
Republic of China on Joint
Venture 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.
2. PARTIES
TO THE JOINT VENTURE
2.1 Parties to
this Agreement are as follows:
Party A: Chinese Party:
Baotou Iron & Steel (Group) Co., Ltd. (Baotou Steel)
Located at River West band Industrial district, Kundulun
District,
Baotou City, Inner Mongolia;
Representative: Lin, Dong Lu, (Nationality: China)
Party B: General Steel Investment Co., Ltd. (General Steel)
Located at Offices of Offshore Incorporations Limited.
Offshore Incorporation Centre P.O. Box 957, Road
Town, Totoria, British Virgin Islands;
Representative: Yale Yu, (Nationality: USA)
Party C: Da Qiu Zhuang Metal Sheet Co., Ltd. (Qiu Steel)
Located at Da Qiu Zhuang, Jing Hai County, Tianjin City;
Representative Yu, Zuo Sheng (Nationality: China)
2.2 Parties A,
B and C may be
hereinafter referred
to individually
as a
"Party" and collectively as the "Parties."
2.3 Each of
the Parties hereby
presents and warrants
to the other Parties
that it has full legal authority and power to enter into this
Agreement
and perform its
obligations
hereunder and that its representatives
named above
are duly authorized to sign this Agreement and other
relevant documents on behalf of such Party.
3. ESTABLISHMENT OF THE JOINT VENTURE
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3.1 In
accordance with the
Joint Venture Law and other relevant published
laws and regulations,
the Parties
hereby agree to establish a Joint
Venture Limited
Liability Company
(hereinafter referred
to as "Joint
Venture" or "JV")
within the territory
of Inner Mongolia
Autonomous
Region, the People's Republic of China.
3.2 The
English name of the Joint Venture shall be: Baotou Steel -
General
Steel Special Steel Joint Venture Company Limited.
3.3 The legal
address of the Joint
Venture will be located at Kundulun
District, Baotou City, Inner Mongolia, China.
3.4 All
activities
of the Joint Venture
in China shall be governed by the
laws, decrees and relevant rules and regulations of China.
3.5 The form
of organization
of the Joint Venture shall be a limited
liability company.
The liability of each Party is limited to the
capital contribution
to the registered capital in accordance with
Section 5 of this Agreement, including increases and decreases
in each
Party's share of ownership interest made in compliance with the
Chinese
regulations.
4. PURPOSES, SCOPE AND SCALE OF PRODUCTION AND BUSINESS
4.1 The
purposes of the Joint Venture shall be, in conformity with the
wish
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.
4.2 The
products of the Joint Venture shall be special steel. The products
shall be sold in both domestic and International market. The
production
scale of the Joint Venture will be 600,000 metric tons a year.
5. TOTAL INVESTMENT, REGISTERED CAPITAL AND OWNERSHIP
5.1 The total
amount of investment is approximately thirty million US
DOLLARS. (USD $30,000,000 or RMB 240,000,000)
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Party A shall contribute land, existing equipment and materials.
The
estimated value of its investment is 98 million RMB (approximately USD
$12,000,000);
Party A shall have 49% of ownership interest with its
contribution;
Party B shall contribute cash.
The estimated
investment
is 62 million RMB according to the base
exchange rate announced by the People's Bank of China on the day of
its
submission(approximately USD $7,500,000); Party B shall have 31% of
ownership interest with its contribution;
Party C will contribute cash.
The estimated
investment
is 40 million RMB (approximately USD
$5,000,000); Party C
shall have 20% of
ownership interest with its
contribution;
The value of land,
existing equipment,
materials and houses of the
factory to be
contributed
by Party A is subject to the Chinese
qualified accountant's appraisal. Party B and Party C shall
increase or
reduce their capital
investment
respectively by the percentage listed
hereunder, subject to the appraisal results.
The registered capital of the Joint Venture should be RMB
(pound)*200,000,000 ( approximately USD $24,000,000);
Scope of investment:
Party A: The full
payment of its
contribution
should be made at
the
date of the approval
of Joint Venture;
Party B: The
payment to be made by Party B towards the registered
capital of the Joint Venture Company will be made as follows:
a. 30% of its
capital contribution within 30 days of the date of
approval of the Joint Venture;
b. 30% of its capital
contribution
within 3 months of the date of
approval of the Joint Venture;
c. 40% of its capital
contribution
within 6 months of the date of
approval of the Joint Venture.
Party C: The
payment to be made by Party C towards the registered
capital of the Joint Venture Company will be made as follows:
a. 30% of its
capital contribution within 30 days of the date of
approval of the Joint Venture;
b. 30% of its capital
contribution
within 3 months of the date of
approval of the Joint Venture;
c. 40% of its capital
contribution
within 6 months of the date of
approval of the Joint Venture.
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5.2 After the
registered capital is
paid up by the Parties, an accounting
firm registered
in China appointed by the Parties
shall verify that
contributions of this
contract have been
made in accordance
with the
terms and conditions of this Agreement and issue a verification
report,
based on which the Joint Venture shall issue an investment
certificate
to each Party.
This report will be signed by both the President and the
Vice President of the Joint Venture.
5.3 Should a
Party intend to
assign all or part of its interest in the
Joint Venture to a third Party, written consent must be obtained from
the other parties and an affirmative decision by the Board of
Directors
and approval from the appropriate examination and approval authority
shall be required. The registration procedures for the changes
shall be
dealt with.
In case of any transfer by any party herein in this
Agreement, the other
Parties herein will have a preemptive right over
the shares to be transferred. Provided the 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 rules above shall
be deemed invalid.
6. RESPONSIBILITIES OF THE PARTIES
6.1
Responsibilities of the Party A:
a. Making capital
contributions
at the specified
time in accordance
with term 5.1 and term hereof;
b. In charge of applying for and obtaining the approval, registration
and business license
and dealing with other
formalities with relevant
Chinese governmental departments for the establishment and
operation of
the Joint Venture
and for obtaining the best treatment granted to
Sino-Foreign joint ventures;
c. To promptly provide
sufficient raw materials, water, electricity,
gas, transportation
and other services for the Joint Venture in
accordance with the annual production plan and plan for balanced
energy
usage of Party A ;
d. To provide sufficient water, electricity, gas and transportation
for
the Joint Venture at prices either:
1.
Compliance with government quoted prices if there is
any; or
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2. Fair
market price as quoted to a third party,
provided no government quotations exist; or
3.
Subject to
negotiations in case neither of the above
is applicable;
e. A contract with respect to the supply of raw materials,
air, water,
electricity and gas shall be signed separately by the Joint Venture
and
Party A's
company.
f. To acquire the benefit of national and local preferential policies
exclusively for Sino-foreign joint ventures and programs of
Developing
West China.
6.2
Responsibilities of Party B.
a. Making capital contributions in accordance with term 5.1;
b. Assisting
Party A for
obtaining the
approval, registration and
business license;
c. Making the best effort in assisting Joint Venture to develop
international market for its products.
6.3
Responsibilities of Party C
a. Making capital contributions in accordance with term 5.1;
b. Assisting
Party A for
obtaining the
approval, registration and
business license.
7. PRODUCTION AND SALES OF PRODUCTS
7.1 Production
and Products
The Joint Venture's
main production lines are composed of: 1 set
of
iO850 convertible
slab machine, 4 sets of iO550 continues rolling
mills, push-type
heating furnace, step cooling bed, nine-high jib
straighten machine and relevant automatic control system;
The Joint Venture's
products are focused
on Special Steel
Products:
Alloy and carbon structure steel, and formed steel.
7.2 The
products of the Joint Venture shall be sold in the Chinese
market
and the best efforts will be made in order to sell part of the
products
in the overseas market.
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7.3 The
products of the Joint Venture shall be sold throughout China
without geographic
restriction
and may be sold by the
Joint Venture
directly or by appropriate distributors. The sales methods and prices
shall be determined by the General Manager following recommendation of
the Board of Directors
of the Joint Venture based on the domestic
market conditions,
competitiveness
of the products and the economic
situation of the Joint
Venture. The Joint Venture shall be free to
determine and raise
the selling prices of
its products and to sell at
its own discretion, in accordance with the preceding
provisions.
8. BOARD OF DIRECTORS
8.1 The Board
of Directors shall be
established at the date of issuance of
the business license.
8.2 The Board
of Directors shall
consist of seven ( 7)
directors of which
three (3)shall be
appointed by Party A,
two ( 2 ) should be appointed
by Party B and two (2) should be appointed by Party C. The chairman
of
board shall be appointed by Party A. The vice chairman by Party C. The
term of the directors
is four ( 4) years.
This term of office
may be
renewed upon reappointment by the appointing party.
8.3 The
highest authority of the Joint Venture shall be its Board of
Directors. It shall
decide all major issues concerning the Joint
Venture. In handling
all important matters, the Board of Directors
shall reach its decision through consultation among the
participants in
the principle of equality and mutual benefit. All issues of the Joint
Venture shall be
discussed and approved by two thirds of
directors
present at the board meeting.
8.4 The
following major issues
will require the unanimous approval of all
the directors present at the board meeting:
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;
d. Merger or division of the Joint Venture.
8.5 The
chairman of the board is the legal representative of the joint
venture.
Should the
chairman
be unable to exercise his
responsibilities, he should authorize the vice chairman of the
Board of
Directors to represent the Joint Venture.
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8.6 The Board
of Directors shall
convene at least two meetings every year.
The meeting shall be
called
