<PAGE>
EXHIBIT 10(xxxi)
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SINO-FOREIGN EQUITY JOINT VENTURE CONTRACT
FOR
RONGCHENG CHENGSHAN STEEL CORD COMPANY LTD
BY AND BETWEEN
CHENGSHAN GROUP COMPANY LIMITED
AND
CTB
(BARBADOS) INVESTMENT CO. LTD.
================================================================================
OCTOBER 27, 2005
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TABLE OF CONTENTS
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CHAPTER
PAGE
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CHAPTER 1
DEFINITIONS...............................................
01
CHAPTER 2 PARTIES TO
THE CONTRACT................................... 01
CHAPTER 3
ESTABLISHMENT OF THE JOINT VENTURE........................
02
CHAPTER 4 PURPOSE
AND BUSINESS SCOPE OF THE JOINT VENTURE........... 03
CHAPTER 5 TOTAL
INVESTMENT AND REGISTERED CAPITAL................... 03
CHAPTER 6
REPRESENTATIONS AND WARRANTIES............................
05
CHAPTER 7
RESPONSIBILITIES OF THE PARTIES...........................
06
CHAPTER 8 BOARD OF
DIRECTORS........................................ 08
CHAPTER 9 OPERATION
AND MANAGEMENT.................................. 11
CHAPTER 10 LABOR
MANAGEMENT.......................................... 13
CHAPTER 11 FINANCIAL
AFFAIRS AND ACCOUNTING.......................... 14
CHAPTER 12 PROFIT
DISTRIBUTION....................................... 15
CHAPTER 13 TAXATION AND
INSURANCE.................................... 16
CHAPTER 14 PURCHASE OF
MATERIALS AND SALE OF PRODUCTS................ 16
CHAPTER 15 CONFIDENTIALITY
AND NON-COMPETE........................... 16
CHAPTER 16 DURATION,
TERMINATION AND LIQUIDATION..................... 18
CHAPTER 17 BREACH OF
CONTRACT........................................ 22
CHAPTER 18 FORCE
MAJEURE............................................. 22
CHAPTER 19 DISPUTE
RESOLUTION........................................ 23
CHAPTER 20 GOVERNING LAW
& CHANGE OF LAW............................. 24
CHAPTER 21 EFFECTIVE DATE
OF THE CONTRACT............................ 24
CHAPTER 22 MISCELLANEOUS
PROVISIONS.................................. 24
APPENDIX 1 DEFINITIONS AND
INTERPRETATION............................ 28
APPENDIX 2 EQUITY
TRANSFER/PLEDGE RULES.............................. 32
APPENDIX 3 SHARE PURCHASE
AGREEMENT
35
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<PAGE>
EQUITY JOINT VENTURE CONTRACT
This Sino-foreign Equity Joint Venture Contract (this "CONTRACT")
is made and
entered into in the People's Republic of China ("CHINA" or "PRC")
on this 27th.
day of October, 2005, in accordance with the PRC Sino-foreign
Equity Joint
Venture Law (the "JOINT VENTURE Law") and other relevant PRC laws
and
regulations, by and among:
(1) CHENGSHAN
GROUP COMPANY LTD., a limited liabilities company duly
organized
and
existing under the laws of the PRC with its legal address at No
98,
North Nan
Shan Road, Rongcheng City, Shandong Province, PRC ("PARTY A");
and
(2) CTB
(BARBADOS) INVESTMENT CO. LTD., a company duly organized and
existing
under the
laws of [Barbados] with its legal address at Chancery House,
High Street,
Bridgetown, Barbados, W. I. ("PARTY B").
(Each party is hereinafter individually referred to as a "PARTY"
and
collectively as the "PARTIES".)
WHEREAS:
(A) On the date
of this Contract, Party A and Mr. Teng Liu-zhi [CHINESE
CHARACTERS] ("MR. TENG") are the existing shareholders of
Rongcheng
Chengshan
Steel Cord Co., Ltd. (the "COMPANY"), a limited liability
company
duly organized and existing under the laws of the PRC;
(B) Party A will
purchase from Mr. Teng, and Mr. Teng has agreed to sell to
Party A,
the Company's equity interests owned by Mr. Teng. Therefore,
Party A
will own all the equity interests of the Company prior to the
Completion
Date (as such term defined in the Share Purchase Agreement);
(C) Party A has
agreed to sell to Party B, and Party B has agreed to purchase
from Party
A, a portion of twenty five percent (25%) of the equity
interest
of the Company in accordance with the terms and conditions of
the
Share
Purchase Agreement entered into among Party A, Party B and the
Company on
the date of this Contract; and
(D) In
accordance with the principles of equality and mutual benefit,
the
Parties
have held friendly negotiations in relation to the terms and
conditions
for converting the Company from a domestic limited liability
company
into a Sino-foreign equity joint venture.
NOW, THEREFORE, the Parties hereby agree as follows:
CHAPTER 1 DEFINITIONS
Unless the terms or context of this Contract provide otherwise,
capitalized
terms used herein without definition have the meanings assigned to
them in
Appendix 1 attached to this Contract.
CHAPTER 2 PARTIES TO THE CONTRACT
2.1 The Parties.
The Parties to this Contract are as follows:
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(1)
Party A:
Chengshan Group Company Ltd.
Country of Registration: PRC
Legal Address:
No. 98, Nanshan Road
North, Rongcheng
City, Shandong Province, PRC
Current Legal Representative: Che Hong-Zhi
Nationality:
Chinese
(2)
Party B:
CTB
(BARBADOS) INVESTMENT CO. LTD.
Country of Registration:
Barbados
Legal Address:
Chancery House, High Street,
Bridgetown, Barbados, W. I.
Current Legal Representative: Harold C. Miller
Nationality:
U.S.A.
CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE
3.1
Establishment of the Joint Venture. In accordance with the Joint
Venture
Law and
other relevant PRC laws and regulations, the Parties hereby
enter
into this
Contract for the establishment of the Joint Venture as a
Sino-foreign equity joint venture in the form of a limited
liability
company.
3.2 Joint
Venture Name, Legal Address.
(1)
The name of the
Joint Venture in English is "Rongcheng Chengshan
Steel Cord Company Ltd."
The name of the Joint Venture in Chinese is [CHINESE CHARACTER]
(2)
The legal
address of the Joint Venture is Chengshan Road, Rongcheng
City, Shandong Province, PRC.
3.3 Limited
Liability Company. The Joint Venture shall be organized as a
company
with limited liability under PRC law, liable for its own debts
with its
own assets. The liability of each Party shall be limited to the
amount of
the Registered Capital expressly subscribed by such Party. No
Party
shall be obligated at any time to provide any funds to, or on
behalf
of, the
Joint Venture by way of capital contribution, loan, advance,
guarantee
or otherwise, except as specifically provided in this Contract,
or as
otherwise agreed to in writing by the Parties. The Parties shall
not
be liable
for the debts of the Joint Venture, unless otherwise
specifically agreed in writing between a particular creditor and
the Party
or Parties
concerned. Subject to the terms and conditions of this
Contract,
the profits, risks and losses of the Joint Venture shall be
shared by
the Parties in proportion to their respective contributions to
the
Registered Capital.
2
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3.4 PRC Law. The
activities of the Joint Venture shall be governed by, and its
legal
rights and operational autonomy shall be protected in
accordance
with, the
laws and regulations of the PRC.
CHAPTER 4 PURPOSE AND BUSINESS SCOPE OF THE JOINT VENTURE
4.1 Purpose of
Joint Venture. The purpose of the Joint Venture is to use
advanced
technology and management methods to develop, manufacture and
sell the
Products on the international and domestic markets and to earn
a
satisfactory return on investment for the Parties.
4.2 Scope of
Business. The Joint Venture's scope of business shall be to
design, develop,
manufacture, and process (consuming both domestic and
imported
materials) steel cords and tire bead wires; provide technical
support
and after sales service for such products; and market and sell
such
products.
CHAPTER 5 REGISTERED CAPITAL
5.1 Registered
Capital. The Registered Capital of the Joint Venture shall be
Renminbi
one hundred and thirty million (RMB(Y)130,000,000).
5.2 Schedule for
Capital Contributions. For avoidance of doubt, the Parties
hereby
agree that (i) conversion of the Party A's equity interest of
the
Company
into its Percentage Interest in the Registered Capital of the
Joint
Venture on the Establishment Date; and (ii) completion of Party
B's
payment of
the Transaction Price (as such term defined in the Share
Purchase
Agreement) pursuant to the payment schedule stipulated in
Article
3.1 under
the Share Purchase Agreement shall be deemed as completion of
capital
contribution of the Parties to the Joint Venture.
5.3 Conditions
Precedent to the Contribution of Registered Capital.
The
Parties' contribution to the Registered Capital of the Joint
Venture
pursuant
to Article 5.2 hereof shall be conditioned on the satisfaction
of
all of the
following:
(1)
Party A has
acquired all the equity interests of the Company;
(2)
the Examination
and Approval Authority has issued a Certificate of
Approval, and any required changes to this Contract have been
agreed
to in writing by the Parties;
(3)
a Business
License has been granted to the Joint Venture which
authorizes the full scope of business of the Joint Venture
described
in Article 4.2 or any required changes thereto have been agreed
to
in writing by the Parties; and
(4)
all Parties have
obtained corporate approvals in respect of this
Contract from their respective board of directors as may be
necessary.
3
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5.4 Capital
Contribution Verification and Certificate. An accountant
registered
in the PRC shall be engaged by the Joint Venture to verify the
respective
capital contributions of each Party and provide a capital
verification report(s) accordingly. The Joint Venture, upon the
receipt of
a
satisfactory capital verification report, shall issue a capital
contribution certificate to the relevant Party. This certificate
shall
include
the following items: name of the Joint Venture; the
Establishment
Date; the
names of the Parties and the amount of their respective capital
contributions; the date on which the capital contributions were
made; and
the date
of issuance of the capital contribution certificate. Each
capital
contribution certificate shall be signed by the Chairman and
the
Vice-Chairman of the Joint Venture. The capital contribution
certificates
shall only
certify the investment of each Party and shall not be deemed as
a note or
other negotiable instrument.
5.5 Financing.
Subject to the terms and conditions of this Contract, to the
greatest
extent permitted by relevant law, the Joint Venture may finance
its
operations and capital needs by way of loans, including but not
limited to
shareholder loans, loans from such banks, other financial
institutions or qualified lenders inside or outside of China and
upon such
terms and
subject to such conditions as may be approved by the Board.
Party A
hereby undertakes to appropriately support, and to the extent
necessary,
provide a loan at an amount of US$ 6,400,000 to the Joint
Venture as
soon as practicable upon the Completion (as such term defined
in the
Share Purchase Agreement), which shall have a term of at least
10
years
bearing interest at the prevailing market rate and will be
subordinated to the claims against and liabilities incurred by the
Joint
Venture.
5.6 Increase of
Registered Capital. The Registered Capital of the Joint
Venture
may be increased by a unanimous resolution of the Board, which
resolution
shall stipulate the timing and other terms of such increase,
with such
increase subject to the approval of the Examination and
Approval
Authority
and registration with the Registration Authority. If any Party
chooses
not to participate in any such additional investment in the
Joint
Venture,
the other Party shall have the option to make the additional
contribution to the Joint Venture's Registered Capital and the
ownership
percentages of the Parties' equity interests in the Joint Venture
shall be
adjusted
accordingly.
5.7 Transfer of
Equity Interests.
(1)
If one Party
wishes to transfer all or part of its Percentage
Interest in the Joint Venture to any third party, it shall
obtain
the written consent of (including waiver of preemptive rights
by)
the other Party, and the transfer shall be presented to the
Examination and Approval Authority for approval. The Party agree
to
be bound by the detailed rules set forth in Appendix 2 attached
to
this Contract, which rules are to implement the principle
described
in the preceding sentence.
5.8 Share
Purchase. On the date of this Contract, Party A and Party B
shall
enter into
a share purchase agreement (the "SHARE PURCHASE AGREEMENT") in
substantially the form attached as Appendix 3 hereto, pursuant to
which
Party A
has agreed to sell to Party B, and Party B has agreed to
purchase
from Party
A, twenty five percent (25%) of the equity interest of the
Company in
accordance with the terms and conditions therein.
4
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CHAPTER 6 REPRESENTATIONS AND WARRANTIES
6.1
Representations and Warranties. Each Party hereby represents and
warrants
that, as
of the date of this Contract and as of a date on which a Party
makes a
capital contribution to the Joint Venture in accordance with
Article
5.2 herein, it:
(1)
has the capacity
and authority to enter into this Contract and to
perform its obligations hereunder, and is duly organized and
validly
existing under the laws of the PRC in the case of Party A, and
under
the laws of Barbados in the case of Party B;
(2)
is not a party
to, bound by or subject to any contract, instrument,
charter or by-law provision, statute, regulation, order,
judgment,
decree or law which would be violated, contravened or breached
by,
or under which any default would occur as a result of, the
execution
and
delivery by such Party of this Contract or the performance by
such Party of any of the terms of this Contract, or which
restricts
such Party from entering into this Contract or performing its
obligations and abiding by the terms hereunder;
(3)
has duly
authorized, executed and delivered this Contract and that
this Contract constitutes a legal, valid and binding obligation
enforceable in accordance with its terms;
(4)
will contribute
capital or transfer shares in a manner which does
not conflict with, violate or result in a breach of, any of the
terms, conditions or provisions of any law, regulation, order,
writ,
injunction, decree, determination or award of any court,
governmental department, board, agency or instrumentality or
any
arbitrator, or result in the creation or imposition of any
lien,
charge, security interest or encumbrance of any nature
whatsoever
upon such capital or shares;
(5)
freely enters
into this Contract and has not and will not hereafter
incur any obligations or commitments of any kind which would in
any
way hinder or interfere with its acceptance or performance of
its
obligations hereunder; and
(6)
(i) has
carefully read the entire Contract including the Appendices
hereto; (ii) fully understands all of the terms, conditions,
restrictions and provisions set forth in this Contract, (iii)
agrees
that the terms, conditions, restrictions and provisions herein
are
necessary for the reasonable and proper protection of the
business
of the Joint Venture and the other Party, and (iv) acknowledges
that
each such term, condition, restriction and provision is fair
and
reasonable with respect to the subject matter thereof.
6.2
Representations and Warranties in Respect of the Company's
Equity
Interest.
In respect of the Company's equity interest relating to the
share
purchase specified in Article 5.8 hereof, Party A represents,
warrants
and undertakes to Party B, as of the date of this Contract and
as
of the
Completion Date (as such term defined in the Share Purchase
Agreement), those representations, warranties and undertakings set
forth
in the
Share Purchase Agreement are true, accurate and complete.
6.3 Cure and
Indemnification Obligations.
5
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(1)
In case of any
breach of the Contract by any Party, it shall, in
accordance with the direction of the non-breaching Party within
thirty (30) days after receiving a notice of the non-breaching
Party
concerning any breach, take all necessary actions to cure such
breach.
(2)
Each Party
agrees to indemnify and hold the other Party and the
Joint Venture harmless from and against any and all claims,
losses,
damages, and costs arising out of any of its breach of any of
its
covenants or representations and warranties contained herein, .
CHAPTER 7 RESPONSIBILITIES OF THE PARTIES
7.1 Party A's
Responsibilities. In addition to its other obligations under
this
Contract, Party A shall be responsible for the following
matters:
(1)
Providing
capital contributions in accordance with the terms and
conditions of this Contract;
(2)
Using its best
endeavors (acting at all times in close consultation
with Party B) to assist the Joint Venture to:
(a) obtain all
necessary governmental approvals and completing all
required registrations for the establishment and operation of
the Joint Venture;
(b) liaise with
PRC national, provincial, municipal or local
governmental authorities and other relevant institutions or
organizations;
(c) obtain the
most preferential tax, customs, foreign exchange
and other favorable treatment that are or may become available
to the Joint Venture and/or the Parties under relevant
national and local laws and regulations of the PRC; and
(d) procure
necessary equipment, materials, articles for office
use, means of transportation, telecommunications facilities
and other public utilities, in accordance with the Joint
Venture's request.
(3)
Using its best
endeavors (acting at all times in close consultation
with Party B) to assist the Joint Venture to register with the
relevant tax bureau, to open such foreign exchange and RMB bank
accounts, assist the Joint Venture with all required foreign
exchange approvals, and assist the Joint Venture in applying for
all
approvals required to remit to Party B in foreign exchange
distributable profits and all other payments required to be paid
to
Party B;
(4)
Providing
necessary assistance to the Joint Venture in recruiting
suitable management personnel, technical personnel and other
necessary employees to be employed by the Joint Venture;
(5)
Assisting the
Joint Venture to contact banks and other financial
institutions inside the PRC and hold discussions with them with
respect to the raising of any loans required by the Joint
Venture;
6
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(6)
Assisting
foreign workers, staff, and personnel (including
Directors, managers, technicians, and contractors appointed or
selected by Party B) in obtaining PRC visas and work permits
for
travel to China directly related to the operation of the Joint
Venture if requested by Party B;
(7)
Be responsible
for any environmental pollution, fines, charges or
losses caused by it prior to the Establishment Date, and
indemnify
the Joint Venture for any financial burden and/or losses arising
out
of any contamination caused by it prior to the Establishment
Date;
(8)
Providing a
shareholder loan to the Joint Venture according to
Article 5.5 herein; and
(9)
Assisting with
and carrying out other relevant matters as may be
reasonably requested by the Board from time to time.
7.2
Responsibilities of Party B. In addition to its other obligations
under
this
Contract, Party B and shall be responsible for the following
matters:
(1)
Providing
capital contributions in accordance with the terms and
conditions of this Contract;
(2)
Providing any
necessary assistance to the Joint Venture's
recruitment of suitable expatriate management personnel,
technical
personnel and other necessary expatriate employees to be employed
by
the Joint Venture on the basis of merit;
(3)
Assisting the
Joint Venture to contact banks and other financial
institutions outside of the PRC and hold discussions with them
with
respect to the raising of any foreign exchange loans required by
the
Joint Venture;
(4)
Assisting the
Joint Venture in training key staff and employees;
(5)
Seconding
relevant management personnel, technical personnel and
other necessary staff to work for the Joint Venture as per the
Joint
Venture's request; and
(6)
Assisting with
and carrying out other relevant matters requested by
the Joint Venture from time to time.
7.3 Related
Party Transactions. The Parties shall procure that all related
party
transactions with respect to the Joint Venture shall be
transparent
to the
Parties and be conducted on an arm's length basis, provided
however,
it is the intention of the Parties that if the price, quality
and
delivery of the
Products meet the requirements of the Tire JVs, the Tire
JVs will
purchase from the Joint Venture. Any significant purchases
(including
purchases of raw materials) by the Joint Venture from the
Parties or
their Affiliates shall be approved by the Board in accordance
with
Article 8.3 herein.
7
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CHAPTER 8 BOARD OF DIRECTORS
8.1 Formation of
the Board.
(1)
The Board shall
be the highest authority of the Joint Venture. It
shall discuss and determine all strategic business and
financial
issues and operational issues of the Joint Venture in
accordance
with the provisions of this Contract and the Articles of
Association.
(2)
The Board shall
consist of three (3) Directors, of which two (2)
shall be appointed by Party A and one (1) shall be appointed by
Party B. At the time this Contract is executed and when
replacement
Directors are appointed, the Parties shall notify one another
in
writing of the names and addresses of its appointees, together
with
a brief curriculum vitae and a list of other official functions,
if
any, that the relevant appointees will concurrently carry out
for
the Joint Venture. Each Party shall cause the Directors appointed
by
it to perform the obligations specified in this Contract and as
required under relevant PRC laws and regulations.
(3)
Directors shall
each be appointed for terms of four (4) years, and
may serve consecutive terms if reappointed by the Party
originally
appointing such Director.
(4)
Any Party may,
at any time with or without cause, remove and replace
a Director that it has appointed by written notice to the Joint
Venture and to the other Party. If a seat on the Board is
vacated
due to the retirement, resignation, illness, disability or death
of
a Director or by the removal of such Director by the original
appointing Party, the Party which originally appointed such
Director
shall appoint a successor to serve the remainder of such
Director's
term.
(5)
If either Party
or the Board has reason to believe that a Director
has materially breached his/her duties as a Director (provided
such
breach appear to be supported by reasonable grounds as determined
by
a simple majority of the Directors), or has been convicted of
committing an act or omission constituting fraud, theft,
embezzlement or other violations of relevant PRC law, the Board
may
remove the relevant Director immediately. Following any such
removal, the Party that originally appointed the relevant
Director
shall appoint a successor to serve the remainder of such
Director's
term.
8.2 Chairman and
Vice Chairman of the Board.
(1)
The Board shall
have one (1) Chairman and one (1) Vice Chairman. A
Director appointed by Party A shall serve as Chairman of the
Board,
and a Director appointed by Party B shall serve as Vice Chairman
of
the Board.
(2)
The Chairman of
the Board shall be the sole legal representative of
the Joint Venture. The Chairman shall perform his or her duties
and
responsibilities within the scope of authority delegated by the
Board, and in accordance with this Contract and relevant PRC
laws.
Without prejudice to Article 8.1(4) above, when the Chairman is
temporarily unable to perform his or her responsibilities, he or
she
may designate in
writing the Vice Chairman or any other Director to
represent the Joint Venture in such capacity within such
temporary
period.
8
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8.3 Powers of
the Board.
(1)
Each Director
shall have one vote on any matter subjected to Board
vote. Neither the Chairman nor the Vice-Chairman, in their
capacity
as such, shall be entitled to have any extra vote in any meeting
of
the Board. This provision is without prejudice to Article 8.4(6)
on
proxies.
(2)
The quorum
necessary for a meeting of the Board shall be two thirds
(2/3) of the Directors. This requires at least two (2) Directors
to
be in attendance for a quorum, with at least one Director
appointed
by each Party at presence.
(3)
The following
matters require a decision by the Board supported by
the affirmative vote of all Directors present and eligible to
vote
(or represented in accordance with Article 8.4(6) in a duly
constituted meeting of the Board or as per Article 8.4(9):
(a) any
amendment of the Articles of Association;
(b) termination
of this Contract;
(c) dissolution
of the Joint Venture;
(d) increase or
decrease of the Registered Capital of the Joint
Venture;
(e) amalgamation
or merger of the Joint Venture with any other
company, association,
partnership or legal entity;
(f) division or
change in the form of legal organization of the
Joint Venture.;and
(g) annual
capital expenditure budget.
(4)
The Parties
agree that all matters except those listed in Article
8.3(3) above can be decided by the Board supported by a simple
majority of Directors present and eligible to vote (or
represented
in accordance with Article 8.4(6)) in a duly constituted meeting
of
the Board or as per Article 8.4(9).
(5)
The Board shall
by resolution supported by a simple majority of
Directors formally authorize the General Manager and/or other
Persons with necessary powers to implement decisions of the Board
in
accordance with this Contract, and, more generally, to conduct
the
day-to-day business of the Joint Venture in accordance with the
then
current business plan.
(6)
The Board shall
adopt rules and procedures regarding (a) provision
of guarantee or security by the Joint Venture to any Person,
(b)
creation of any security interest on any property of the Joint
Venture, (c) custody of the Joint Venture's chops, and (d) such
other matters as the Board deems necessary.
8.4 Board
Meetings.
9
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(1)
Board meetings
shall be held at least twice a year. Meetings shall
be held at the
registered address of the Joint Venture or such other
address in China or abroad as may be agreed by the Board. The
first
Board meeting shall be held no later than sixty (60) days after
the
Establishment Date.
(2)
The agenda for
Board meetings shall be determined by the Chairman of
the Board, but shall include in any event the items proposed by
other members of the Board.
(3)
Board Meetings
shall require prior written notice to all Directors
of not less than four (4) weeks (unless otherwise agreed
unanimously
by all the Directors) setting forth the date, time, place and
agenda. Directors may waive their right to receive prior
written
notice of any meeting.
(4)
Upon the written
notice of the Chairman of the Board or upon written
request of one third (1/3) or more of the Directors of the
Joint
Venture specifying the matters to be discussed, the Chairman of
the
Board shall within thirty (30) days convene an interim meeting
of
the Board, provided that a quorum will be present for such an
interim meeting, whether in person or by proxy.
(5)
The Chairman is
responsible for convening and presiding over all
Board meetings. If the Chairman is unable to convene and/or
preside
over a Board meeting, a Director designated in writing by the
Chairman shall convene and/or preside over such Board meeting.
(6)
Board meetings
may be attended by Directors in person, by telephone
or video conference, provided, however, that if a Director is
unable
to participate in a Board meeting, he/she shall issue a written
proxy authorizing another Director or individual to attend the
meeting on his/her behalf. A Director or other individual so
entrusted shall have the same rights and powers as the Director
who
issued the proxy.
(7)
Board meetings
shall be duly convened if a quorum is constituted in
attendance, in person or by proxy. In the event that the
Directors
appointed by any Party fail to attend a Board meeting resulting in
a
lack of a quorum, and such failure to attend is due to a
dispute
between the Directors or Parties, such Party shall be deemed to
be
in breach of this Contract, and Article 17 will become
applicable.
(8)
For the purpose
of this clause, if a written resolution is executed
in identical counterparts, such signed counterparts shall
together
be deemed to constitute a single resolution, effective on the
day
the last Director signs the relevant counterpart.
(9)
Notwithstanding
any other provisions herein, Board resolutions may
be adopted by written consent by the Board in lieu of a meeting
if
the relevant resolutions are sent to all Directors and the
resolutions are affirmatively signed and adopted by the number
of
Directors necessary to make such a decision as stipulated in
Article
8.3 above. Such written Board resolutions may consist of
several
counterparts in identical form each signed by one or more of
the
Directors. Such written Board re
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solutions shall be filed with the Board meeting minutes and
shall
have the same force and effect as a Board resolution adopted at
a
duly constituted and convened Board meeting.
(10)
Board meetings shall
be held in English and Chinese and all Board
minutes and Board resolutions and agendas and other Board
meeting
documents shall be prepared and provided in both English and
Chinese. The Chairman shall cause complete and accurate minutes
(in
English and Chinese versions) to be kept of all meetings
(including
meeting notices) and of matters addressed or raised at such
meetings. Minutes of all Board meetings shall be circulated to
all
Directors promptly after each meeting. Any Director who wishes
to
propose any amendment or addition to the meeting minutes shall
submit the same in writing to the Chairman not later than
fifteen
(15) days after receipt of the minutes, and the Chairman shall
circulate such proposal to all the Directors. Any Director who
wishes to object to the proposed amendment to the minutes shall
submit the same in writing to the Chairman and all other
Directors
not later than fifteen (15) days after receipt of the proposed
amendment, otherwise such proposed amendment shall be adopted
and
the minutes shall be amended accordingly. If the proposed
amendment
and relevant objection are not resolved within thirty (30) days
of
the Chairman's receipt of such objection, neither the proposal
nor
the objection shall be adopted but both would be noted as an
attachment to the minutes. All Directors shall sign each page of
the
final minutes within sixty (60) days after receipt of same, and
return such signed copy to the Joint Venture. The original
minutes
shall be kept on file with the Joint Venture and shall be
available
to any Director or their proxies for inspection or copying at
any
reasonable
time.
(11)
No remuneration shall
be paid by the Joint Venture to any of its
Directors in his/her capacity as such; provided, however, that
in
the event that a Director is concurrently an officer of the
Joint
Venture, such Director shall be entitled to remuneration for
his/her
service as an officer only. A Director may recover from the
Joint
Venture such expenses as are reasonably and properly incurred
in
connection with his/her attending the Board meetings or other
activities of the Joint Venture where his/her presence is
required.
The Board shall establish a policy to implement this
subsection.
CHAPTER 9 OPERATION AND MANAGEMENT
9.1 Management
Organization
(1)
The Joint
Venture shall establish an operation and management team
to be responsible for the Joint Venture's daily operation and
management. Such team shall include the General Manager and
such
other personnel as determined by the Board of Directors (the
"MANAGEMENT PERSONNEL").
(2)
The General
Manager and the Joint Venture Controller ("JV
CONTROLLER") shall be appointed by the Board upon the nomination
of
Party A and the Vice General Manager shall be appointed by the
Board
upon the nomination of Party B. Each of the Management
Personnel
shall be appointed or removed by the General Manager, except
that
the Vice General Manager and JV Controller shall be appointed
or
removed by the Board. Any of the Management Personnel shall
handle
matters delegated to him or her by the General Manager and shall
be
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responsible to the General Manager for the efficient
implementation
of such responsibilities.
(3)
In the event
that the General Manager, Vice General Manager or JV
Controller is found incompetent, commits graft or serious
dereliction of duty, he/she shall be dismissed by the Board.
9.2
Responsibilities of Management Personnel
(1)
The
responsibility of the General Manager shall be to carry out the
various
resolutions of the Board and to organize and direct the
daily operation and management of the Joint Venture. The
General
Manager may consult with the Vice General Manager in dealing
with
material matters, but the General Manager shall have the
authority
to make final decisions.
(2)
Subject to the
terms and conditions imposed by the Board, the JV
Controller shall be in charge of the day-to-day financial
operations
of the Joint Venture under the supervision of the General
Manager,
shall assist the General Manager in preparation of the documents
set
out in Article 9.2(5)(a)(1) below, and shall carry out the
decisions
of the Board and General Manager.
(3)
With the
exception that Management Personnel nominated by Party B
may remain to be employees of Party B, the other Management
Personnel shall be the full time employees of the Joint Venture
and
shall not,
without prior approval by the Board, hold any managerial
posts in other economic organizations while serving as an
employee
of the Joint Venture. Without prior approval by the Board,
Management Personnel shall not hold any position in any
economic
organization or other entities competing with the Joint Venture
except those affiliated to any Party which the Board confirms
as
being exceptions. If the General Manager or any other
Management
Personnel intends to resign from his or her position, such
person
shall be required to submit the resignation notice to the Board
at
least thirty (30) days prior to the intended departure date.
(4)
The General
Manager shall, within the scope of the authority
conferred upon him/her by the Board, represent the Joint Venture
in
dealings with other parties, and appoint and dismiss
subordinates.
(5)
The General
Manager shall be responsible for preparation of
following documents (all in both Chinese and English
languages):
(a) he/she shall
prepare for submission to the Board for review
and approval, and upon such approval shall implement, the
following:
(i) an annual
operating plan, operating budget, marketing
and sales budget, financial budget, business and sales
performance targets for the Joint Venture;
(ii) the
organizational and managerial rules of the Joint
Venture;
(iii) any other documents or plans for the Joint Venture that
are deemed necessary by the Board.
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(b) he/she shall
submit any major revisions to such budgets, plans
or manuals for the Joint Venture to the Board for review and
approval prior to their implementation.
(6)
The General
Manager shall submit a quarterly production and sal
