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EXHIBIT 10 (xxvii)
================================================================================
SINO-FOREIGN EQUITY
JOINT VENTURE CONTRACT
FOR
COOPER CHENGSHAN (SHANDONG)
PASSENGER TIRE COMPANY LTD.
BY AND
AMONG
SHANDONG CHENGSHAN TIRE
COMPANY LIMITED BY SHARES
AND
COOPER TIRE INVESTMENT HOLDING
(BARBADOS) LTD.
AND
JOY THRIVE
INVESTMENTS LIMITED
================================================================================
OCTOBER 27, 2005
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TABLE OF
CONTENTS
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CHAPTER
PAGE
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CHAPTER 1
DEFINITIONS................................................. 1
CHAPTER 2 PARTIES TO THE
CONTRACT.....................................
1
CHAPTER 3 ESTABLISHMENT OF THE JOINT
VENTURE.......................... 2
CHAPTER 4 PURPOSE, BUSINESS SCOPE AND
SCALE OF THE JOINT VENTURE...... 3
CHAPTER 5 TOTAL INVESTMENT AND
REGISTERED CAPITAL.....................
3
CHAPTER 6 REPRESENTATIONS AND
WARRANTIES..............................
5
CHAPTER 7 RESPONSIBILITIES OF THE
PARTIES............................. 7
CHAPTER 8 BOARD OF
DIRECTORS.......................................... 9
CHAPTER 9 OPERATION AND
MANAGEMENT....................................
13
CHAPTER 10 LABOR
MANAGEMENT............................................ 15
CHAPTER 11 FINANCIAL AFFAIRS AND
ACCOUNTING............................
16
CHAPTER 12 PROFIT
DISTRIBUTION......................................... 17
CHAPTER 13 TAXATION AND
INSURANCE...................................... 18
CHAPTER 14 PURCHASE OF MATERIALS AND
SALE OF PRODUCTS.................. 18
CHAPTER 15 CONFIDENTIALITY AND
NON-COMPETE.............................
19
CHAPTER 16 DURATION, TERMINATION AND
LIQUIDATION....................... 21
CHAPTER 17 BREACH OF
CONTRACT.......................................... 26
CHAPTER 18 FORCE
MAJEURE............................................... 26
CHAPTER 19 DISPUTE RESOLUTION.......................................... 26
CHAPTER 20 GOVERNING LAW & CHANGE OF
LAW............................... 27
CHAPTER 21 EFFECTIVE DATE OF THE
CONTRACT..............................
28
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<TABLE>
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CHAPTER 22 MISCELLANEOUS
PROVISIONS....................................
28
APPENDIX 1 DEFINITIONS AND
INTERPRETATION
APPENDIX 2 CAPITAL CONTRIBUTION SCHEDULE
APPENDIX 3 ASSET PURCHASE AGREEMENT
APPENDIX 4 AGREEMENT ON LABOR/PERSONNEL
ISSUES
APPENDIX 5 OFFICE, SINGLE-WORKER
DORMITORY AND
EMPLOYEE CAFETERIA LEASE
AGREEMENT
</TABLE>
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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) SHANDONG CHENGSHAN TIRE COMPANY
LIMITED BY SHARES, a company limited by
shares duly organized and existing
under the laws of the PRC with its
legal address at No. 98, Nanshan
Road North, Rongcheng City, Shandong
Province, PRC ("PARTY
A");
(2) COOPER TIRE INVESTMENT HOLDING
(BARBADOS) LTD., a company duly organized
and existing under the laws of
Barbados with its legal address at
Whitepark House, White Park Road,
Bridgetown, Barbados ("PARTY B"); and
(3) JOY THRIVE INVESTMENTS LIMITED, a
company duly organized and existing
under the laws of British Virgin
Islands with its legal address at P.O.
Box 957, Offshore Incorporations
Center, Road Town, Tortola, British
Virgin Islands ("PARTY
C").
(Each party is hereinafter individually referred to as a "PARTY" and
collectively as the "PARTIES".)
In accordance with the principles of equality and mutual benefit, the Parties
have held friendly negotiations in relation to the terms and conditions for
establishing 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:
(1) Party A: Shandong Chengshan Tire
Company Limited
by Shares
Country of Registration: PRC
Legal Address: No. 98, Nanshan Road North,
Rongcheng
City, Shandong Province, PRC
Current Legal
Representative: Che Hong-Zhi
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Nationality: Chinese
(2) Party B: Cooper Tire Investment
Holding
(Barbados) Ltd.
Country of Registration: Barbados
Legal Address: Whitepark House, White Park
Road,
Bridgetown, Barbados
Current Legal
Representative: Harold C. Miller
Nationality: U.S.A
(3) Party C: Joy Thrive Investments Limited
Country of Registration: British Virgin Islands
Legal Address: P.O. Box 957, Offshore
Incorporations
Center, Road Town, Tortola, British
Virgin Islands
Current Legal
Representative: Nuansir Sirisuwat
Nationality: Thailand
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
"Cooper Chengshan
(Shandong) Passenger Tire
Company Ltd." The name of the Joint
Venture in Chinese is
[CHINESE CHARACTERS]
(2) The legal address of the Joint Venture is
No. 99, West Qingshan 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
according to Article 5.2 hereof. 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
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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.
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, BUSINESS SCOPE
AND SCALE OF THE JOINT VENTURE
4.1 Purpose of Joint Venture. The
purpose of the Joint Venture is to fully
initiate advantages of the Parties
so as to enhance production technical
standard, to promote high quality
products, to produce internationally
reputable products, to apply
brand-new operation concept and management
method, to strengthen overall
capacity and competitiveness in the
international market, to increase
economic benefit, and to produce a
satisfactory return to all
investors; meanwhile, to boost the industrial
level through an integration of the
tire industry, to provide job
opportunities in the locale, to
introduce more foreign capital to the
locale, and for sure to enhance the
fast economic development in Rongcheng
City.
4.2 Scope of Business. The Joint
Venture's scope of business shall be to
design, develop, manufacture, and
sell half-steel radial passenger tires
and half-steel radial light truck
tires; provide technical support and
services for such products.
4.3 Scale of Joint Venture. The tire
manufacture volume of the Joint Venture
shall to the extent practicable
increase by 10% per year over the next
three years. The Joint Venture
shall from time to time introduce and
utilize the international modern
technology and management expertise to
fully activate investment benefits.
CHAPTER 5 TOTAL INVESTMENT
AND REGISTERED CAPITAL
5.1 Total Investment and Registered Capital.
The Total Investment of the Joint
Venture shall be United States
Dollars ninety-nine million
(US$99,000,000). The Registered
Capital of the Joint Venture shall be
United States Dollars thirty-three
million (US$33,000,000).
5.2 Capital Contributions. Subject to the Capital
Contribution Schedule
attached as Appendix 2 hereto, each
Party shall contribute to the
Registered Capital as follows:
(1) Party A shall contribute all of the land use
rights and buildings
free of all liens and
encumbrances to the Joint Venture, valued in
the amount of United States
Dollars eleven million five hundred
fifty thousand (US$
11,550,000), representing thirty five percent
(35%) of the Registered
Capital;
(2) Party B shall contribute cash in the amount
of United States Dollars
sixteen million eight hundred
and thirty thousand (US$16,830,000),
representing fifty one
percent (51%) of the Registered Capital; and
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(3) Party C shall contribute cash in the amount
of United States Dollars
four million six hundred and
twenty thousand (US$4,620,000),
representing fourteen percent
(14%) of the Registered Capital.
5.3 Schedule for Capital Contributions.
Subject to Article 5.4 below, the
Parties shall contribute their
respective contributions to the Registered
Capital in accordance with the
Capital Contribution Schedule attached as
Appendix 2 hereto.
5.4 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) 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;
and
(2) 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.
5.5 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.
5.6 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.
5.7 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, any other Party or Parties
shall have the option to make the
additional contribution to the
Joint Venture's Registered Capital and the
ownership percentages of the
Parties' equity in the Joint Venture shall be
adjusted accordingly.
5.8 Failure to Make Contributions to Registered
Capital.
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(1) If any Party or Parties ("BREACHING
PARTY(IES)") fails to make any
contribution to the
Registered Capital within the period set forth
in Article 5.3 (the amount
due and owing is referred to as the
"DEFAULT CAPITAL
CONTRIBUTION"), the Breaching Party(ies) shall pay
the other Parties or Party
(the "NON-BREACHING Party(ies)") (in
proportion to their
Percentage Interests) a default penalty of 0.05%
per day based on the Default
Capital Contribution from the first day
of the breach until the day
on which the Default Capital
Contribution is contributed
in full by the Breaching Party(ies).
(2) Notwithstanding the foregoing, if the
Breaching Party(ies) fails to
make the Default Capital
Contribution for more than 30 days, the
Non-Breaching Party(ies)
shall have the right to determine, in
accordance with the
applicable laws and regulations, to:
(i) make the additional contribution to satisfy
the amount of the
Registered Capital of
the Joint Venture, so as to increase the
Percentage Interest(s)
of the Non-Breaching Party(ies) and
dilute the Percentage
Interest(s) of the Breaching Party(ies)
accordingly; or
(ii) terminate this Contract in accordance with
Article 16.2,
subject to the approval
of the Examination and Approval
Authority.
(3) The provisions of this Article 5.8 shall not
prejudice any other
rights or remedies the
Non-Breaching Party(ies) may have under this
Contract or under applicable
laws and regulations with respect to
the failure of the Breaching
Party(ies) to contribute capital.
5.9 Transfer of Equity Interests. 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 Parties, and the
transfer shall be presented to the
Examination and Approval Authority
for approval.
5.10 Assets Transfer. On the date of
this Contract, Party A and the Joint
Venture shall enter into an asset
purchase agreement (the "ASSET PURCHASE
AGREEMENT") in substantially
the form attached as Appendix 3 hereto for
any existing assets of Party A in
respect of the business specified in
Article 4.2 hereof, as identified
by the Joint Venture and Party A, to be
transferred to the Joint Venture.
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, and under the laws of
British Virgin Islands in the
case of Party C;
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(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 or transfer assets 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 assets;
(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 Parties, 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 Party A's Assets. In respect
of Party A's existing assets
relating to the business specified in Article
4.2 hereof, Party A represents,
warrants and undertakes to Party B and
Party C, as of the date of this
Contract and as of the Closing Date (as
such term defined in the Asset
Purchase Agreement), those representations,
warranties and undertakings set forth in
the Asset Purchase Agreement are
true and accurate in material way.
6.3 Cure and Indemnification
Obligations.
(1) In case of any breach of the Contract by any
Party, it shall, in
accordance with the direction
of any non-breaching Party within
thirty (30) days after
receiving a notice of such non-breaching
Party concerning any breach,
take all necessary actions to cure such
breach.
(2) Each Party agrees to indemnify and hold the
other Parties 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,
including reasonable
attorneys' fees incurred in connection with the
enforcement of this Contract
or the undertaking of any necessary
legal actions or responses
involving any third parties.
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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
and the Capital Contribution Schedule
attached as Appendix 2
hereto;
(2) Using its best endeavors (acting at all
times in close consultation
with Party B and Party C) 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 and Party C) 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 and Party C in foreign
exchange distributable
profits and all other payments required to be
paid to Party B and/or Party
C;
(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) Assisting foreign workers, staff, and
personnel (including
Directors, managers,
technicians, and contractors appointed or
selected by Party B and/or
Party C) 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 and/or Party C;
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(7) Causing Chengshan Group to enter into the
lease agreements in
substantially the form
attached as Appendix 5 hereto in respect of
the office space,
single-worker dormitories and employee cafeteria
with the Joint Venture,
pursuant to which Chengshan Group, at the
discretion and request of the
Joint Venture, shall lease the office
space, single-worker
dormitory and employee cafeteria to the Joint
Venture as necessary for
normal and effective use and operation of
the Joint Venture.
(8) Executing and performing, in accordance with
the terms therein, the
various Supplementary
Contracts to which it is a party;
(9) 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 Party A prior to the Establishment
Date; and
(10) 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 shall be
responsible for the following matters:
(1) Providing capital contributions in
accordance with the terms and
conditions of this Contract
and the Capital Contribution Schedule
attached as Appendix 2
hereto;
(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;
(6) To the extent practicable, providing
internationally advanced
technology to the Joint
Venture; and
(7) Assisting with and carrying out other
relevant matters requested by
the Joint Venture from time
to time.
7.3 Responsibilities of Party C. In
addition to its other obligations under
this Contract, Party C shall be
responsible for the following matters:
(1) Providing capital contributions in
accordance with the terms and
conditions of this Contract
and the Capital Contribution Schedule
attached as Appendix 2
hereto; and
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(2) Assisting with and carrying out other
relevant matters requested by
the Joint Venture from time
to time.
7.4 Execution of Supplementary
Contracts. Before the Establishment Date, the
Parties may jointly sign the
Supplementary Contracts on behalf of the
Joint Venture. After the Establishment Date,
all Supplementary Contracts
signed by the Parties shall be
ratified by the Board in accordance with
the procedures set forth herein and
in the Joint Venture's Articles of
Association and formally executed
by the legal representative of the Joint
Venture. Each Party shall be bound
by the relevant Supplementary Contracts
to which it is a contracting party
on his own behalf, provided that,
however, no Party shall incur any
liability or assume any obligations
solely as a result of its signing
of any Supplementary Contracts on behalf
of the Joint Venture before the
Establishment Date.
7.5 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. Any significant
purchases (including purchases of
raw materials but excluding Products) by
the Joint Venture from Party B or
its Affiliates shall be sold by Party B
or its Affiliates to the Joint
Venture at cost, unless otherwise agreed by
the Parties. The Vice General
Manager or another member of the senior
management team nominated by Party
A, and either the General Manager or
another member of the senior
management team nominated by Party B shall
approve all related party
purchases.
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 seven (7)
Directors, of which two (2)
shall be appointed by Party
A, four (4) shall be appointed by Party
B, and one (1) shall be appointed
by Party C. 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
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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 B
shall serve as Chairman of the Board,
and a Director appointed by
Party A 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.
8.3 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 five (5) directors to
be in attendance for a
quorum.
(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;
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(e) amalgamation or merger of the Joint Venture
with any other
company, association,
partnership or legal entity; and
(f) division or change in the form of legal
organization of the
Joint Venture.
(4) The following matters require a decision by
the Board supported by
the affirmative vote of two
thirds (2/3) of the 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) overall macro business strategy;
(b) derivation from profit distribution plan set
forth in Article
12;
(c) the Joint Venture's external guarantee;
(d) major assets disposal (defined as assets
with a net book value
greater than Five
Million United States Dollars
(US$5,000,000));
(e) selection of the External Financial Auditor
with the
restriction that the
selected Auditor must be one of the Big
Four; and
(f) approval of financial control and financial
reporting /
accounting policies
(must be in compliance with Chinese law
and applicable U.S.
law)
(5) The Parties agree that all matters except
those listed in Article
8.3(3) and Article 8.3(4)
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).
(6) 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.
(7) 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.
(1) Board meetings shall be held at least twice
(2) 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.
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(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, the Vice Chairman
or 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.
If after two attempts to
convene Board meetings that are not
achieved due to the lack of a
quorum, a Board meeting may be
convened with a simple
majority of Directors (provided such policy
only applies to the
face-to-face Board meetings).
(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 all Directors.
Such written Board resolutions may
consist of several counterparts
in identical form each signed
by one or more of the Directors. Such
written Board resolutions
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
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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 Operation Principle. The Joint
Venture will through the technical exchange
of the Parties constantly boost
production technical level to reach an
international modern level,
including product design, manufacture process,
testing method, material recipe,
quality standard and personnel training.
The Joint Venture will constantly
exert efforts on technical reform based
on the current production
equipment, in order to enhance capability of
product line and automatization,
satisfy the technical requirement and the
needs to promote the product grade.
9.2 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 determi
