Exhibit 1.1
Initial Stage Joint Venture Agreement
1. GENERAL PROVISIONS
1.1 In accordance with the "Law of the P.R.
China on Joint Venture
Using
Chinese and Foreign
Investment" and other relevant published laws and
regulations of China, the following Parties
Party A: Chinese Party:
Party C: Foreign Party
Party B: Chinese Party;:
have an intention to
invest in the Joint Venture Enterprise:
2. PARTIES TO THE JOINT
VENTURE
2.1 Parties to the Intended Joint Venture under this contract are as
follows:
Party A: Chinese Party:
Baogang Steel Union ( Baotou Steel )
President Cao Zhongkui
Nationality: China
China Inner
Mongolia
Boagang
Steel Union (Baotou Steel) is
incorporated in Inner
Mongolia, People's Republic of China, with
registered capital of RMB 12.5 Billion Yuan. Baotou Steel is listed
in
Shanghai Stock
Exchange. Baotou Steel's business is steel products
production, marketing and sales;
Party B: General Steel Investment Holding, ( General Steel )
President Yale
Nationality: USA
General Steel is part of a United States Public Company;
incorporated
in British Virgin
Island. General Steel's business is focused on
investing in Chinese Steel industry via US capital market
vehicle;.
Party C: Da Qiu Zhuang Metal Plate Company ( Qiu Steel)
President Yu Zuo Sheng
Nationality: China
Daqiuzhuang Metal Plate Company is registered in Daqiuzhuang
Tianjing
City, People's
Republic of China;
Qiu Steel's
business is hot
roll
sheet metal production, marketing and sales.
Parties A, B and C may
as the contract requires be herein after
referred to
individually
as a "Party" and collectively as the
"Parties."
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Each of the Parties
hereby presents
and warrants to the
other Party
that it has full legal
authority and the power to enter into this
contract and
perform its obligations hereunder and that its
representation named
above is duly
authorized to sign
this contract
and other relevant documents on behalf of such Party.
3. ESTABLISHMENT OF THE JOINT
VENTURE
3.1 In accordance "Law of the P.R. China on Joint Venture Using
Chinese
and Foreign
Investment"
and other relevant published laws and
regulations, the
Parties agree to establish a Joint Venture Limited
Liability Company (hereinafter referred to as "Joint Venture" or
"JV")
within the Chinese territory.
3.2 The name of the Joint Venture
shall be: Baotou
General Plate
Company
Limited; The name is subject to further discussion and decision of
the
Board of Directors.
The legal address of the Joint Venture will be
located at West River Band Industrial District, United Baotou Steel
Corporation facility;
Kung Du district,
Baotou City, Inner Mongolia,
Peoples' Republic of China;
3.3 All activities of the Joint Venture in
China shall be governed by the
laws, decrees and
relevant rules and regulations of the People's
Republic of China.
3.4 The form of organization of the Joint Venture shall be a limited
liability company.
The liability of each Party is limited
to making
contribution to the
registered capital in
accordance with item 5
of
this contract,
including each Party's stake in all other capital
increases decided in
compliance
with the Chinese
regulations;
The
profits of the
Joint Venture shall be shared by the Parties in
proportion to
their respective subscribed contributions to the
registered capital of
the Joint Venture.
The Joint Venture equity
interest and profits
shall be shared 49% by
Party A , 41% to Party B
and 10% by Party C. The liability of each Party to the
Joint Venture
is limited up to the Parties respective contribution of the
registered
capital of the Joint Venture.
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, develop new
products and
gain competitive position in both the domestic and
international markets
in quality, variety and price by adopting
advanced technology in
the production of Steel Plate, and scientific
management methods,
so as to constantly
raise economic
results and
ensure satisfactory economic benefits for each Party.
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4.2 The scope of business of the Joint Venture shall be to: The produce
and sell Steel Plate.
The products made by the Joint Venture shall be
sold on the domestic market and International market;
JV will form a
Organization
Team (Team) of five person for this
project; Party A will recommend one person as team leader in charge
of
the project; Party B
will recommend
one person as vice
team leader;
The Team will have two department: Technical and Business;
Team has duties as follow:
- Will
classify duties of all parties and technical issues of
the project;
- Will
propose and monitor the processing of JV company;
- Will
propose management team, company structure and nominees
of Board of Directors of JV;
- Will
prepare JV corporation
articles, proposals
and report
for Board of Directors of JV;
- Will
coordinated with all parties
The Technical department of the Team has duties as follow:
- Collect
all the information relate with production line, out
sourcing to related parties and coordinate with all parties;
- Make
Technical proposal, and getting approved by experts
- Design
production
line the blue print,
and define
detail
technical issue and getting solution for the project;
-
Coordinated will all parties;
The Business Department of Team has duties as follow:
- Collect
all the legal and financial documents of all
parties;
- Make
proposal for JV Memorandums if necessary;,
- Propose
article of cooperation of JV company;
- Apply
for government approval;
-
And all
business related issues;
The team will dissolved one the joint venture company is
established;
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4.3 The production scale of the Joint
Venture shall be as follows:
- JV will
purchase, dissemble and shipping back the production
of Platco Plate Mill in Canada to site of JV company's
address: West River Band Industrial District, United Baotou
Steel Corporation
facility; Kung Du
district, Baotou
City,
Inner Mongolia,
Peoples' Republic of
China; Plateco
Plate
mill is designed for
producing steel plates
with 3.8 meter
width, 800000 tons
annually; The
dissemble,
shipping and
installation time is estimated for 12 months;
-
Production capacity
will be improved to
12,000,000 metric
tons a year;
- The
production will connected with United Baotou Steel's two
furnaces- continues
costing production
lines with 210 tons
of capability,
which is capable to satisfy all the raw
material needs for JV production line;
5: TOTAL INVESTMENT, REGISTERED
CAPITAL AND OWNERSHIP
5.1 The total amount of the investment
and the registered
capital of the
Joint Venture is estimate as Ninety million U.S. DOLLARS
($90,000,000
US DOLLARS);
The exact investment amount is subject the cost of
project;
Party A shall contribute partially cash, land, and existing
materials;
Party B shall contribute the purchased Platco production line, spare
parts, and cost of dissemble, shipping and installation;
Party C will
contribute cash;
The amount of contributions is subject to third party's
appraisal and
valuation; If the
investment
is access the
estimated amount, all
parties shall continue
to invest to the JV with designated portion;
with cash, material or raised funds;
5.2 Ownership interest:
Party A owns 49% of JV `s ownership interest with its
contribution;
Party B owns 41% of JV's ownership interest with its
contribution;
Party C owns 10% of JV's ownership interest with its
contribution;
6: RESPONSIBILITIES OF THE
PARTIES
6.1 Responsibilities of the Party
A:
To assist JV to apply 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 advantages
granted to
sino-foreign joint ventures.
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b. Making capital
contributions
at the specified time
in accordance
with term 5.1 and term hereof.
c. Provide all
the raw material-
steel slab from United
Baotou Steel
at fair market and acceptable price;
d. Provide water,
electricity,
gas and transportation from United
Baotou Steel at reasonable, acceptable price;
6.2 Responsibilities of the Party
B.
a. Making capital contributions in accordance with term 5.1;
b. Party B will
honoring the priority of hiring Baotou steel's
employees, includes
engineers,
worker and clerks in
accordance with
item 10.3.
c. Can not sell Platco production line to any other party with
Party's
knowledge;
6.3 Responsibilities of Party C
a. Making capital contributions in accordance with term 5.1;
b. Arrange due diligent study in Canada and United States;
c. Oversee, assistant
and coordinate with all party of the processing
of purchasing Platco production line;
7.: SALES OF PRODUCTS
7.1 The products of the Joint Venture
shall be sold on the Chinese markets
and the best efforts will be made in order to sell part of the
production on the overseas markets.
7.2 The products of the Joint Venture shall be sold throughout the
People's Republic of 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's
decision following
recommendation
of the board of directors with
respect to 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, and sell
at its own discretion, in accordance with the preceding
provisions.
8: BOARD OF DIRECTORS
8.1 The board of directors shall be
established within one month after the
date of
issuance of the Business License.
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8.2 The board of directors
shall consist of five
(5) directors.
Nominees
of the Chairman and Vice Chairman will be discussed by all
parties.
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 equity and mutual benefit. All issues of the
Joint
Venture shall be
discussed and approved
by two thirds of the members
of the board of directors.
The following major issues will require the unanimous approval of all
the members of the board: a. Amendment of the articles of
association
of the joint venture.
b. Termination and dissolution of the Joint
Venture. c. An increase of the registered capital of the Joint
Venture
and a transfer of the
ownership. d. Merger
of the Joint Venture with
another economic organization.
8.4 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.
8.5 The board of directors
shall convene at least on meeting ev
