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EXHIBIT 10 (xxvii)
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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
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OCTOBER 27, 2005
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TABLE OF CONTENTS
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CHAPTER
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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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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
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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 determined by the Board of Directors (the
"MANAGEMENT PERSONNEL").
(2)
The General
Manager shall be appointed by the Board upon the
nomination of Party B and the Joint Venture Controller ("JV
CONTROLLER") shall be appointed by the Board upon the nomination
of
Party A. 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
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by the General Manager and shall be 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.
9.3
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 A
