Exhibit 10.1
JIANGSU MUELLER-XINGRONG COPPER INDUSTRIES LIMITED
EQUITY JOINT VENTURE AGREEMENT
AMONG
MUELLER STREAMLINE CHINA, LLC
MUELLER STREAMLINE HOLDING, S.L.
JIANGSU XINGRONG HI-TECH CO., LTD.
AND
JIANGSU BAIYANG INDUSTRIES LTD.
Dated as of November 24, 2005
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EQUITY JOINT VENTURE AGREEMENT
THIS EQUITY JOINT VENTURE AGREEMENT (the "Agreement"), dated as
of
November 24, 2005, among Mueller Streamline
China, LLC ("Mueller Delaware"), a
company duly organized and existing under
the laws of the State of Delaware of
the United States having its registered
address at 2711 Centerville Road, Suite
400, Wilmington, DE 19808, U.S.A., Mueller
Streamline Holding, S.L., a company
duly organized and existing under the laws
of Spain with its principal U.S.
office at 8285 Tournament Drive, Suite 150,
Memphis, TN 38125, U.S.A. ("Mueller
Spain", together with Mueller Delaware,
each a "Mueller Party", and
collectively, the "Mueller Parties"),
Jiangsu Xingrong Hi-Tech Co., Ltd. ("XR"),
a company limited by shares duly organized
and validly existing under the laws
of the PRC with its registered address at
No. 8 Xingye Road, New District,
Changzhou, Jiangsu Province, China, and
Jiangsu Baiyang Industries Ltd. ("BY"),
a limited liability company duly organized
and validly existing under the laws
of China with its registered address at No.
99 North Hua Yang Road, Jintan
Economic Development Zone, Jiangsu
Province, China (XR and BY, each a "Chinese
Party" and collectively the "Chinese
Parties"; the Chinese Parties and the
Mueller Parties, each a "Party", and
collectively, the "Parties").
GENERAL STATEMENT
In
accordance with the PRC Sino-Foreign Equity Joint Venture Law
and
the implementing rules (with any future
amendments, supplements or other
modifications, together, the "Joint Venture
Law") and other applicable Chinese
laws and regulations and following friendly
negotiations, the Parties hereby
agree to establish a Sino-foreign equity
joint venture limited liability company
(the "Company") based on the terms and
conditions set forth herein and in the
Articles of Association.
ARTICLE 1
DEFINITIONS
Except as otherwise provided under the terms of this Agreement,
the
following defined terms shall have the
following respective meanings:
"Affiliate", with respect to any Party, shall mean any corporate
or
other entity that controls or is controlled
by such Party or is under common
control with such Party by a third party.
For the purposes of this definition, a
party has "control" of another party if the
first party has, directly or
indirectly, at least 51% voting power at
the second party's decision making
authority.
"Articles of Association" shall mean the Articles of Association
of
the Company concurrently executed by the
Parties hereto on the date hereof, as
the same may be amended, restated,
supplemented or otherwise modified from time
to time, which will become effective only
upon approval by the Examination and
Approval Authority.
"Board" shall mean the Board of Directors of the Company
established
pursuant to the provisions of Article
7.
"Branch Office" means any of the Company's registered branch
offices
(including liaison offices), which offices
may only conduct the activities
specifically permitted by applicable
Chinese laws and the Articles of
Association.
"Business Day" shall mean any day other than a Saturday, Sunday or
a
day that is a legal holiday in China.
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"Business License" shall mean the business license of the
Company
issued by the relevant Registration
Administration Authority after this
Agreement is approved by the Examination
and Approval Authority.
"CEO" shall have the meaning set forth in Section 9.1.
"CFO" shall have the meaning set forth in Section 9.1.
"China" or the "PRC" shall mean the People's Republic of China
excluding Hong Kong SAR, Macao SAR and
Taiwan solely for the purpose of this
Agreement.
"Company" means Jiangsu Mueller-Xingrong Copper Industries
Limited,
a Sino-foreign equity joint venture limited
liability company to be established
by the Parties pursuant to the terms of
this Agreement.
"Company Auditor" shall have the meaning set forth in Section
14.7.
"Contributed Land" shall have the meaning set forth in Section
5.3(b).
"Definitive Agreements" shall mean this Agreement, the Articles
of
Association, the Trademark License Letter
Agreement, the Land Letter Agreement,
and the Most Favored Customer Letter
Agreement.
"Director" shall have the meaning set forth in Section 7.1(a).
"Dollar", "U.S. Dollar" or "US$" shall mean the lawful currency
of
the United States.
"Effectiveness Date" shall mean the date of the official
certificate
issued by the Examination and Approval
Authority to approve this Agreement, the
Articles of Association and the
establishment of the Company, on which date this
Agreement becomes effective.
"equity interest" in the Company, with respect to any Party,
shall
mean the Registered Capital contribution of
such Party made to the Company and
the rights and interests in connection with
such contribution; "equity share",
with respect to any Party, shall mean the
percentage of such Party's Registered
Capital contribution in the Company's total
amount of Registered Capital.
"Establishment Date" shall have the meaning set forth in
Section
3.1.
"Event of Force Majeure" shall mean any event provided under
Section
21.1.
"Examination and Approval Authority" shall mean the relevant
Chinese
government authority in charge of
examination and approval of this Agreement,
the Articles of Association and the
establishment of the Company or any other
competent government authority duly
delegated pursuant to the Joint Venture Law.
"Fair Market Value", with respect to any Party's equity interest
in
the Company, shall mean the market value of
such equity interest determined
pursuant to the provisions of Section
17.1.
"Joint Venture Law" shall have the meaning set forth in the
General
Statement.
"Joint Venture Term" shall have the meaning set forth in Article
23.
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"Land Letter Agreement" means a letter agreement to be executed
by
and between BY and the Company on or around
the Establishment Date with respect
to certain protective rights to be granted
by BY to the Company on certain land
the use right of which is owned by BY.
"Most Favored Customer Letter Agreement" means a letter agreement
to
be executed by and between XR and the
Company on or around the Establishment
Date pursuant to which XR will grant the
most-favored-customer status to the
Company with respect to its future
transactions with the Company.
"Registered Capital" shall have the meaning set forth in
Section
5.2(a).
"Registration Administration Authority" shall mean any
competent
Chinese industry and commerce
administration authority that have the
registration authority over the Company
pursuant to the Joint Venture Law.
"Renminbi" or "RMB" shall mean the lawful currency of China.
"Reserve Fund" shall mean a reserve fund established by the
Company
pursuant to the requirements of the Joint
Venture Law and the relevant
provisions of this Agreement and the
Articles of Association.
"Senior Management" shall have the meaning set forth in Section
9.1.
"Simple Majority" or "Simple Majority of the Board" shall mean
over
50% of the Board members present in person
or by proxy at a meeting of the Board
duly convened pursuant to Article 8.
"Three Funds" shall mean the Reserve Fund, the enterprise
development fund and the employee bonus and
welfare fund required to be
established by all Sino-foreign joint
ventures pursuant to the Joint Venture
Law.
"Total Investment" shall have the meaning set forth in Section
5.1.
"Trademark License Letter Agreement" shall mean the trademark
license letter agreement executed by and
among the Company, XR and Mueller
Industries, Inc. as of the Establishment
Date, substantially in form and
substance of Appendix 3 hereto.
"Workers" shall mean all employees of the Company other than
the
Senior Management.
ARTICLE 2
THE PARTIES
2.1 Parties. The Parties to this Agreement are
as follows:
Mueller Delaware: Mueller Streamline China, LLC
Legal Representative: Michael Fifer
Position: Chairman
Nationality: American
Facsimile: 1-901-753-3250
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Mueller Spain: Mueller Streamline Holding, S.L.
Legal Representative: Michael Fifer
Position: Chairman
Nationality: American
Facsimile: 1-901-753-3254
XR: Jiangsu Xingrong Hi-Tech Co., Ltd.
Legal
Representative: Wei Qi
Position: Chairman
Nationality: Chinese
Facsimile: 86-519-513-0098
BY: Jiangsu Baiyang Industries Ltd.
Legal Representative: Jianjun Zhu
Position: Chairman
Nationality: Chinese
Facsimile: 86-519-232-2750
2.2 Representations and
Warranties.
(a) Each Party hereby represents and warrants to each other
Party
that on the date hereof and on the
Effectiveness Date:
(i) it is
a corporate entity duly organized and validly
existing under the laws of the jurisdiction of its incorporation
and
is in compliance with all requirements of laws of the
jurisdiction
of its incorporation (including, without limitation, all
applicable
environmental laws) in all material aspects;
(ii) it has full
corporate power and authority, government
approvals and third party consents to enter into each of the
Definitive Agreements to which it is a party and to perform its
obligations under each of the Definitive Agreements to which it is
a
party;
(iii) its
representatives have been fully authorized to sign
each of the Definitive Agreements to which it is a party on its
behalf;
(iv) each of the
Definitive Agreements to which it is a
party shall constitute its legal, binding and enforceable
obligations once such Definitive Agreement become effective;
(v) the
execution, delivery and performance of each of the
Definitive Agreements to which it is a party will not violate in
any
way its business license, certificate of incorporation,
corporate
constitutional documents, or any applicable laws, rules,
decrees,
authorizations or approvals, or any provisions of any
contractual
arrangements to which it is a party or is otherwise bound;
(vi) no
litigation or proceeding of or before any arbitrator
or government authority is pending (or, to the knowledge of
such
Party, threatened) against such Party that may affect in any
material aspect such Party's ability to execute, deliver and
perform
its obligations under any of the Definitive Agreements to which
it
is a party;
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(vii) it is the full
and unrestricted legal, beneficial and
record owner or possessor of all of the assets and property
rights
that it will contribute to the Company, free and clear of all
claims, liens and encumbrances of third parties, and that it has
the
lawful authority to own or possess, contribute, sell, lease,
operate
and otherwise provide such assets in accordance with the
provisions
of this Agreement or its appendices. For the avoidance of doubt,
BY
hereby represents and warrants that it (x) owns the relevant
land
use rights to the Contributed Land with a total area of 138,069
square meters (equivalent to 207 mu) as described in Appendix 1
hereto, and (y) holds all applicable State-owned Land Use Right
Certificates with respect to such Contributed Land, which
remain
fully valid and effective;
(viii) it has no liability, commitment, indebtedness or
obligation which could prevent, restrict or adversely affect
its
ability to perform its obligations under this Agreement or its
appendices; and
(ix) it will
cause its nominees to the Board of Directors to
vote in accordance with the terms of this Agreement and the
Articles
of Association and will use its best efforts to carry out the
intent
of this Agreement.
(b) The Parties shall each defend, hold harmless and indemnify
each
other Party against any and all direct and
foreseeable losses, damages, expenses
or liabilities arising from its breach or
false provision of any of the
representations and warranties set forth in
paragraph (a) above.
2.3 Change of Legal
Representative. When there is a change of its legal
representative, each Party agrees to
promptly notify each other Party of such
change and the name, position and
nationality of its new legal representative.
2.4 Policy Statement. The
policy of Company is to strictly abide by all
applicable laws and regulations and the
Parties shall use their respective best
efforts to cause the Company to strictly
comply with this policy.
ARTICLE 3
ESTABLISHMENT OF JOINT VENTURE COMPANY
3.1 Establishment of the
Company. The Company shall promptly, and in no
event later than thirty (30) days after the
Effectiveness Date, apply to the
appropriate Registration Administration
Authority for the issuance of its
Business License. The date of issuance of
the Business License shall be deemed
the official establishment date of the
Company (the "Establishment Date").
3.2 Name and Address of
the Company.
(a) The Company will be named "Jiangsu Mueller-Xingrong Copper
Industries Limited" in English and
"********"in Chinese./1/
(b) The legal address of the Company is No. 99 North Hua Yang
Road,
Jintan Economic Development Zone, Jiangsu
Province, China.
(c) The Company may, upon approval by the Board, establish
subsidiaries or Branch Offices in China in
accordance with applicable Chinese
laws and regulations.
----------
1/ Not translated herein.
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3.3 Limited Liability.
(a) The Company is a limited liability company. Each Party shall
be
liable for the debts and losses of the
Company only to the extent of its share
of the Registered Capital required to be
contributed to the Company pursuant to
the terms of this Agreement. The Parties
shall share the profits and losses of
the Company pro rata to their respective
equity shares. No Party shall be
entitled to any distribution of profits by
the Company so long as it is in
default in the payment of any portion of
its contribution to the Registered
Capital and such default has not been cured
by such Party or any other Party
pursuant to the provisions of this
Agreement.
(b) The Company shall indemnify all the losses, damages and
other
liabilities incurred by any innocent Party
in any third party claim against such
Party as a result of any of the Company's
business activities.
3.4 Protection under the
PRC Law. The Company will be an enterprise
legal person organized under the PRC law.
All of its legitimate business
activities and legal rights and interests
shall be protected by the provisions
of the relevant PRC laws, decrees and
regulations.
ARTICLE 4
PURPOSE AND SCOPE OF
BUSINESS
4.1 Purpose of Business.
The purposes of the Company are to design,
manufacture, market, import and export, and
sell world-class copper-tube, copper
fittings and related products in the PRC,
to enhance the economic cooperation
among the Parties, and to realize
satisfactory financial and social returns for
the Parties.
4.2 Scope of Business. The
Company will be engaged in the design and
manufacture of copper tube, copper fittings
and related products, sales of its
own products, and provisions of after-sales
customer support and other related
services.
ARTICLE 5
TOTAL INVESTMENT AND REGISTERED CAPITAL
5.1 Total Amount of
Investment. The total
amount of investment of
the Company is Ninety Million United States
Dollars (US$90,000,000) (the "Total
Investment").
5.2 Registered
Capital.
(a) The registered capital of the Company shall be Thirty-Eight
Million Four Hundred Fifteen Thousand Eight
Hundred and Forty-Two United States
Dollars (US$38,415,842) (the "Registered
Capital");
(b) The Parties' respective share of the Registered Capital shall
be
as follows: Mueller Delaware to contribute
in U.S. Dollar cash, in the
aggregate, US$17,479,208, representing
45.5% of the Registered Capital of the
Company; Mueller Spain to contribute in
U.S. Dollar cash, in the aggregate,
US$1,920,792, representing 5% of the
Registered Capital of the Company; XR to
contribute, in the aggregate, US$11,497,862
(including certain fixed assets
valued at US$2,572,000, certain patent
valued at US$3,722,581, and the balance
shall be paid in RMB cash equivalent),
representing 29.93% of the Registered
Capital of the Company; and BY to
contribute, in the aggregate, US$7,517,980
(including the land use right to certain
piece of land valued at US$2,712,673
and certain fixed assets valued at
US$4,805,307), representing 19.57% of the
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Registered Capital of the Company. The
Parties shall contribute their respective
share of the Registered Capital in three
installments in accordance with
Sections 5.3 through 5.5 and in the amount
and form as set forth in Appendix 2
hereto.
5.3 First Installment
Contribution.
(a) Subject to other provisions herein and unless otherwise
mutually
agreed by all Parties in writing, each
Party shall make its respective first
installment contribution, in the
approximate amount of 36.08% of its share of
the Registered Capital within sixty (60)
days of the Establishment Date. For the
avoidance of doubt, each Party shall make
its first installment contribution in
the form and in amount or value as
specified in Appendix 2 hereto.
(b) Without limiting the general effect of the immediately
preceding
paragraph, BY shall, after re-dividing and
rejoining certain pieces of land into
one whole piece of land prior to the
Effectiveness Date, contribute the relevant
land use right to such piece of land (such
land, before and after the relevant
re-division or rejoining work, the
"Contributed Land") with a total area of
138,069 square meters (equivalent to 207
mu) as described in more details in
Appendix 1 hereto to the Company as its
first installment contribution of the
Registered Capital.
(c) Notwithstanding any other provision of this Agreement, no
Party
shall have any obligation to make its first
installment registered capital
contribution unless and until each of the
following conditions has been
satisfied or waived in writing by all
Parties:
(i) The
Establishment Date has occurred;
(ii) All
required third party consents for the Company's
establishment shall have been obtained;
(iii) All internal corporate approvals
shall have been
obtained and all internal corporate actions shall have been taken
by
all Parties for the Company's establishment;
(iv) All
representations and warranties of the Parties shall
be true and correct in all material aspects; and
(v) No
material adverse change has occurred from the
execution date of this Agreement through the proposed date of
first
installment contribution.
(d) In addition, the Mueller Parties shall not have any
obligation
to make its first installment contribution
unless and until each of the
following conditions has been fulfilled to
the Mueller Parties' satisfaction or
has been specifically waived by the Mueller
Parties in writing, in which case
the Mueller Parties shall be obliged to
make its contribution within seven (7)
days thereafter:
(i) BY has
obtained, in a way satisfactory to the Mueller
Parties, the clean and lawful title to the land use right to
the
Contributed Land and, in this connection, BY shall have, among
others, accomplished the re-division and rejoining process as
described in Section 5.3(b) above, re-executed a State-Owned
Land
Use Right Grant Agreement with competent PRC government authority
or
obtained the approval from such authority, fully paid up the
land
grant premium required therefor, discharged all mortgages on
the
Contributed Land, and obtained a PRC State-Owned Land Use Right
Certificate related thereto;
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(ii) BY shall
have executed the Land Letter Agreement with
the Company in form and substance satisfactory to the Mueller
Parties with respect to certain priority and protective rights
of
the Company to the pieces of land, with a total area of 262.9
mu,
which are
currently owned by BY but will not be contributed to the
Company;
(iii) Each of the
Chinese Parties has actually contributed in
full of its share of the Registered Capital to the Company for
their
first installment contributions and all in-kind contributions
have
been effectively transferred to the Company (in particular, the
land
use rights to the Contributed Land shall have been registered
under
the Company's name);
(iv) Each of the
Definitive Agreements has been duly
executed by all parties thereto; and
(v) All
Registered Capital contributions made by the
Chinese Parties to the Company shall be free and clear of any
lien
or encumbrance.
(e) Any non-defaulting Party may freely terminate this Agreement
and
shall not owe any duties or obligations to
the other Parties or the Company if
the first installment registered capital
contribution by any Party required
hereunder is not made by the expiry of
ninety (90) days after the Establishment
Date whether because any requisite PRC
government approval, registration or
license is not obtained or otherwise.
5.4 Second Installment
Contribution.
(a) Subject to other provisions of this Agreement and unless
otherwise mutually agreed by all Parties in
writing, each Party shall fully
contribute, in the approximate amount of
31.54% of its share of the Registered
Capital, i.e., its second installment
contribution, within ninety (90) days from
the completion date of the first
installment registered capital contributions by
all Parties. For the avoidance of doubt,
each Party shall make its second
installment contribution in the form and in
amount or value as specified in
Appendix 2 hereto.
(b) Notwithstanding any other provision of this Agreement, no
Party
shall have any obligation to make its
second installment registered capital
contribution unless and until each of the
following conditions has been
satisfied or waived in writing by all
Parties:
(i) No
event of termination as described in this Agreement
shall have occurred;
(ii) The Parties
shall have all made their first installment
registered capital contributions in full pursuant to this
Agreement;
and
(iii) The Company
shall have completed an asset purchase
transaction with respect to certain copper-tube facilities and
assets currently owned by XR on terms to be mutually agreed by
XR
and the JV.
(c) In addition, the Mueller Parties shall not have any
obligation
to make their second installment registered
capital contribution unless and
until each of the following conditions has
been fulfilled to the satisfaction of
the Mueller Parties or is specifically
waived by the Mueller Parties in writing,
in which case the Mueller Parties shall be
obliged to make their contribution
within seven (7) days thereafter:
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(i) XR and
BY have actually contributed in full of their
registered capital to the Company for their second installment
contributions and the titles to all in-kind contributions have
been
effectively transferred to the Company;
(ii) All
registered capital contributions made by XR and BY
to the Company shall be free and clear of any lien or
encumbrance;
and
(iii) All copper tube
facilities and assets purchased by the
Company from XR shall be free and clear of any lien or
encumbrance.
5.5 Third Installment
Contribution.
(a) Subject to other provisions herein and unless otherwise
mutually
agreed by all Parties in writing, each
Party shall make its respective
installment contribution, in lump sum the
balance of its respective share of the
Registered Capital within sixty (60) days
from the completion date of the second
installment registered capital
contributions by all Parties. For the avoidance
of doubt, each Party shall make its third
installment contribution in the form
and in amount or value as specified in
Appendix 2 hereto.
(b) Notwithstanding any other provision of this Agreement, no
Party
shall have any obligation to make its third
installment registered capital
contribution unless and until each of the
following conditions has been
satisfied or waived in writing by all
Parties:
(i) No
event of termination as described in this Agreement
shall have occurred;
(ii) The Parties
shall have all made their first and second
installment registered capital contributions in full pursuant
to
this Agreement; and
(iii) The Company
shall have completed an asset purchase
transaction with respect to certain copper-tube facilities and
assets
currently owned by BY on terms to be mutually agreed by BY
and the JV.
(c) In addition, the Mueller Parties shall not have any
obligation
to make their third installment registered
capital contribution unless and until
each of the following conditions has been
fulfilled to the satisfaction of the
Mueller Parties or is specifically waived
by the Mueller Parties in writing, in
which case the Mueller Parties shall be
obliged to make their contribution
within seven (7) days thereafter:
(i) XR and
BY have actually contributed in full of their
registered capital to the Company for their third installment
contributions and the titles to all in-kind contributions have
been
effectively transferred to the Company;
(ii) All
registered capital contributions made by XR and BY
to the Company shall be free and clear of any lien or
encumbrance;
and
(iii) All copper tube
facilities and assets purchased by the
Company from BY shall be free and clear of any lien or
encumbrance.
5.6 Default on Capital
Contribution.
(a) Subject to the provisions of this Agreement, if any Party
fails
to contribute its subscribed share of the
Registered Capital of the Company in
such form and amount, on such
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conditions, and at such times as provided
above,
such Party shall be liable to the Company
for a penalty interest payment on its
defaulted amount at the interest rate equal
to (A) 300 basis points plus (B) the
then-prevailing short term enterprise
lending rate published by the People's
Bank of China, for the period from the due
date of its defaulted registered
capital contribution through the date on
which its default is cured by itself or
any other Party.
(b) If the default by any Party on any registered capital
contribution continues for more than thirty
(30) days, then in addition to the
penalty interest payment described above,
any other Party will be entitled to
cure the default and the defaulting Party's
equity interest in the Company shall
be diluted accordingly. All Parties agree
that in such cases they will use their
best efforts and take all necessary actions
to cause the Company to apply and
obtain all required PRC government
approvals and registrations in order to
effect such equity percentage adjustment.
Alternatively and without limiting the
effect of Section 5.3(e), any
non-defaulting Party may also elect to terminate
this Agreement and the Company by a written
notice served on all other Parties
after the expiry of such 30 day grace
period, without prejudice to any of such
non-defaulting Party's rights and remedies
against the defaulting Party
otherwise available under this
Agreement.
5.7 Increase of Registered
Capital and/or Total Investment. The
Board may decide by unanimous resolutions
to increase the amounts of the Total
Investment and/or the Registered Capital
and the time or times at which any such
increased Registered Capital should be
contributed. The Parties shall take all
necessary actions to facilitate such
increase of the Registered Capital and/or
its Total Investment, including without
limitation, obtaining all necessary PRC
government approvals and consents for such
increase. No increase in the
Registered Capital and/or Total Investment
will be implemented prior to the
approval of and registration with the
competent Chinese government authorities
of the appropriate amendments to this
Agreement and the Articles of Association.
5.8 Borrowing by the
Company. The amount of the Total Investment
exceeding the Registered Capital may be
funded with borrowings by the Company.
None of the Parties is obliged to lend
funds to the Company or guarantee loans
to the Company from third parties or
financial institutions unless otherwise
mutually agreed by the Parties and the
Company. However, if a Party does agree
to make such loans or guarantees upon the
request from the Company based on the
affirmative vote of a Simple Majority of
the Board, it shall be entitled to be
paid interest and/or related fees as if it
were not a party to the Company and
the transaction were a negotiated, arm's
length financing from a third party.
5.9 Investment
Certificates. Whenever any Party has made a required
contribution to the Company's Registered
Capital or any Party's equity share in
the Company has been adjusted pursuant to
this Agreement, the Company shall, on
the basis of a verification report prepared
by the Company Auditor, issue to
such Party an investment certificate signed
by the Chairman of the Board
evidencing the actual payment of the total
amount of its registered capital
contributions, and such Party shall
surrender to the Company for cancellation
any prior investment certificate issued to
it by the Company.
5.10
Additional
Funding, Mandatory Contribution and Preemptive
Rights.
(a) The Company will have the right to issue debt and
additional
equity as necessary to meet its business
needs. Unless otherwise agreed by all
Parties, all shareholder loans made to the
Company shall be allocated among the
Parties, pro rata to their then-effective
equity interest percentages in the
Company. Subject to the terms hereof, the
Parties shall have preemptive rights,
on a pro rata basis, with respect to the
issuance of any debt or equity by the
Company.
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(b) Notwithstanding the above provisions, if more equity is
required
by the Company as determined by the Board
pursuant to the Articles of
Association and any Party chooses not to
subscribe for any such additional
equity, it is specifically agreed that such
Party may be diluted by the other
Parties at, and only at, the then effective
Fair Market Value (as determined
pursuant to Section 17.1 at the time of
such dilution) and on other terms to be
agreed among the Parties.
ARTICLE 6
RESPONSIBILITIES OF THE PARTIES
6.1 Responsibilities of
Chinese Parties. In addition to all other
obligations specifically provided under the
terms of this Agreement, each
Chinese Party shall also be responsible for
the following matters:
(a) Throughout the term (including the initial setup stage) of
the
Company, making every commercially
reasonable effort to assist the Company in
obtaining from the relevant Chinese
government authorities all necessary
approvals, licenses, permits, consents and
registrations required for the
establishment and normal operations of the
Company;
(b) Assisting the Company in applying for all import licenses and
in
handling all customs procedures necessary
for importation of equipment,
materials and other supply;
(c) Assisting the Company in applying for and obtain all
preferential tax and other treatments,
benefits and protections to which the
Company, the Parties and their respective
personnel are currently or may in the
future become available under applicable
PRC laws, regulations and policies or
pursuant to general PRC practice;
(d) Whenever requested, providing their premises for the
Company's
use on arm's length terms to be agreed by
the Parties; providing assistance in
obtaining necessary PRC entry visas for
personnel of the Mueller Parties (and
their family members) working for the
Company or otherwise engaged by the
Company; and providing local transportation
to personnel dispatched by the
Mueller Parties to be engaged in technical
assistance (if applicable) to the
Company;
(e) On an ongoing basis, providing preferential access by the
Company to all of their distribution
networks within China for copper tube and
copper fitting products;
(f) On an ongoing basis, providing access by the Company to any
other business opportunities that may
become available to or be desired by the
Company with respect to copper tube and
copper fitting products and ensuring
that the Company shall have a right of
first refusal to any such business
opportunity related to copper tube and
copper fitting products or services that
has come to any Chinese Party or any of its
subsidiaries and affiliates;
(g) Whenever any applicable new PRC law or regulation is issued
or
any existing PRC law or regulation is
amended, supplemented, rescinded or
otherwise modified which will adversely
affect the Company or its business,
assisting the Company to make applications
to or to discuss with the relevant
PRC government authorities for the purpose
of obtaining any possible exemptions
thereunder;
(h) Assisting the Company in procuring equipment, materials and
office supplies within China on the terms
and conditions to be mutually agreed
by the Parties and the Company;
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(i) Assisting the Company, when necessary and for the purpose
of
ensuring that the various business
activities of the Company comply with the
requirements of applicable PRC laws and
regulations, in its liaison activities
with all relevant PRC entities including
various PRC government authorities; and
(j) Carrying out all other matters entrusted to them by the
Company
for which they confirm, or have confirmed,
that they accept responsibility.
6.2 Responsibilities of Mueller Parties. In addition to all
other
obligations specifically provided under the
terms of this Agreement, the Mueller
Parties shall also be responsible for the
following matters:
(a) Selecting and nominating to the Board a financial manager as
the
Company's CFO;
(b) Assisting with the preparation of all application documents
in
connection with the Company's
establishment;
(c) Whenever requested or desired by the Board, recruiting and
dispatching qualified management,
financial, and/or technical personnel to the
Company from time to time on terms to be
mutually agreed by the Company and the
Mueller Parties; and
(d) Carrying out all other matters entrusted to it by the
Company
for which it confirms, or has confirmed,
that it accepts responsibility.
6.3 Common Non-Compete
Obligation. Each Party (including, in the
case of the Chinese Parties, each of their
shareholders) hereby covenants to
each other Party and the Company that it
will not, through itself or an
affiliate already established or to be set
up in China, compete directly with
the Company within China. Subject to the
foregoing, it is clearly understood and
agreed by the Parties that there is no
restriction hereunder, implied or
otherwise, that would (i) prevent the
Mueller Parties or their respective
Affiliates from any other non-competing
investment, joint venture, or
operational activity in China, although
sales in China of products produced
outside of China are in all cases permitted
and (ii) prevent the Chinese Parties
(including their shareholders) from
conducting research and development on
copper-based alloys or research and
development and production of non-copper
materials.
ARTICLE 7
BOARD OF DIRECTORS
7.1 Establishment.
(a) The Board shall be composed of five (5) members (each, a
"Director"), of which two (2) shall be
appointed by Mueller Delaware, one (1)
shall be appointed by Mueller Spain, one
(1) shall be appointed by XR and one
(1) shall be appointed by BY. Whenever the
equity shares of the Parties are
changed, the Parties shall, as necessary
and upon mutual agreement, also make
adjustments to the Board composition based
on the changed equity share
structure.
(b) The Board shall have one chairman (the "Chairman") and one
vice-chairman (the "Vice Chairmen"). The
Chairman shall be jointly appointed by
the Mueller Parties from the Directors
appointed by it. The Chinese Parties
shall jointly appoint the Vice Chairman
from the Directors appointed by them.
The initial Chairman of the Board will be
Michael Fifer and the initial Vice
Chairman of the Board will be Kejian
Xiao.
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(c) Simultaneously with the execution of this Agreement, each
Party
shall appoint its initial term Board
members, designate the Chairman and the
Vice Chairman pursuant to clause (b) above,
as the case may be, and notify the
other Parties of such appointments and
designations. The Parties specifically
agree that Jiquan (Jason) Gao shall be one
of the initial Directors to be
appointed by the Chinese Parties.
(d) No Director may concurrently serve as a board member of any
other entity whose business directly
competes with that of the Company in the
Company's permitted territory of
business.
(e) The Board shall hold its first meeting as soon as
practicable
after the Establishment Date.
7.2 Term of Office. The
term of office for each Director (including
the Chairman and the Vice Chairman) is four
years. Any Director may be
reappointed by the original appointing
Party for additional four-year periods in
the same manner as set forth in Section
7.1. A Party may remove any Director
appointed by such Party upon ten (10) days
prior written notice to all other
Parties. If a Director voluntarily resigns
or is otherwise unable to carry out
his or her duties as a Director, the Party
originally appointing such Director
shall appoint a successor to serve out such
Director's term.
7.3 Chairman of the Board.
The Chairman is the legal representative
of the Company. The Chairman shall exercise
his/her authority within the limits
prescribed by the Board in accordance with
the Articles of Association. In the
absence of the Chairman or when the
Chairman is otherwise unable to execute
his/her powers and responsibilities as the
Chairman of the Board, the Chairman
shall designate a representative to carry
out his/her powers and
responsibilities as the Chairman in
accordance with the provisions under
applicable PRC law.
7.4 Authority of Board.
The Board is the highest authority of the
Company, and shall have overall and final
responsibility for the management,
business operations and policies of the
Company. Except as otherwise expressly
required by this Article 7, any action by
the Board requires only the
affirmative vote of a Simple Majority of
all Board members present in person or
by proxy at a duly convened Board meeting
at which a quorum is present.
7.5 Matters Requiring
Unanimous Approval. The following matters
require the unanimous affirmative vote of
each Board member present in person or
by proxy at a meeting of the Board duly
called and validly held pursuant to
Article 8:
(a) amendment to the Articles of Association;
(b) early termination or dissolution of the Company;
(c) increase or decrease of the Company's registered capital;
and
(d) merger with or acquisition by other entity, or division, of
the
Company.
7.6 Committees within the
Board. The Board shall establish, among
others, an Audit Committee and a
Compensation Committee. All committees shall be
composed of Directors of the Company and
shall report to the Board. The Mueller
Parties shall jointly appoint the
chairperson of each of the Audit Committee and
the Compensation Committee.
7.7 Personal Liability of
Board Members. No Director shall assume
any personal liability for any acts
performed in his capacity as a member of the
Board unless any action
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or inaction of such Board member
constitutes wilful misconduct, material
negligence or violation of the Chinese
criminal laws. With the exception of the
preceding sentence, the Company shall
indemnify each Director against any claims
that may be brought against such member in
relation to acts performed in his
capacity as a member of the Board. The
Company shall further purchase and
maintain customary and adequate director
and officer insurance that is
reasonably available in China.
7.8 Company Seal. The
Company's seal shall be kept in the principal
office of the Company and be in custody of
the Chairman or other relevant
personnel of the Company designated by the
Chairman. The seal shall be used in
accordance with the relevant provisions of
Chinese laws, the Articles of
Association and the relevant internal rules
and guidelines of the Company.
ARTICLE 8
BOARD MEETINGS
8.1 Board Meetings. The
Chairman shall call and convene a Board
meeting at least quarterly (to be gradually
reduced to semi-annually after the
Company starts its business operations on a
normal basis). The Chairman and the
Vice Chairman may, by agreement upon
consultation between themselves, request to
call an additional Board meeting if the
Chairman or the Vice Chairman believes
such an additional meeting is required. The
Chairman shall decide as soon as
possible the time (in no event later than
the thirtieth day after the above
agreement is reached) and place for such
additional Board meetings, provided
that the Chairman is not required to call
more than one such additional meeting
in any calendar quarter pursuant to this
sentence.
8.2 Quorum for Board
Meeting.
(a) Subject to the provisions in clause (b) below, a quorum for
a
valid Board meeting exists only if at least
four (4) Directors are present in
person or by proxy at the meeting.
(b) If at any duly called Board meeting the required quorum
under
clause (a) above is not present, the
Chairman may, within two (2) to five (5)
days of the failed first meeting, call and
hold a second meeting at the same
place and w
