Baotou Steel - General
Steel
Special Steel
Pipe
Joint Venture
Agreement
(Amendment)
BAOTOU IRON & STEEL
GROUP CO., LTD.
TIANJIN DAQIUZHUANG METAL
SHEET CO., LTD.
JOINT VENTURE AGREEMENT
1. GENERAL
PROVISIONS
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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
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2.1
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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
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3.1
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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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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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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
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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
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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
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5.1
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The total
amount of investment is 50,000,000 RMB (approximately $6,400,000
USD).
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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.
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;
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.
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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
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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
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6.1
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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;
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.
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6.2
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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
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7.1
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Party A will
provide the equipment necessary for creating four special pipe
production lines;
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7.2
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Party A will
provide the production technology and the government production
permission approval by the relevant authority;
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7.3
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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
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8.1
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The Board of
Directors will be established at the date of issuance of the
business license.
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8.2
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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
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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
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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.
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8.5
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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
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The Board of
Directors will convene at least two (2) meetings each y
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