Joint Venture Framework Agreement By and Between Shanxi Meijin Energy Group Co., Ltd. and General Steel Holdings Inc. May 13, 2010
Exhibit 10.1
By
and Between
Shanxi
Meijin Energy Group Co., Ltd.
and
May
13, 2010
1
THIS
JOINT VENTURE FRAMEWORK AGREEMENT (the “Agreement”) is made effective
as of the 13th day of May, 2010 between Shanxi Meijin Energy Group Co., Ltd.
(“Meijin Energy”) and General Steel Holdings, Inc. and any of its nominees or
subsidiaries it nominates to effectuate the purposes of this Agreement (“General
Steel”) (each a “Party” and together the “Parties”).
WHEREAS, the Parties have entered into
an agreement to work together to create a joint venture; and
WHEREAS, the purposes of the joint
venture shall be to integrate and expand Shanxi Meijin Iron and Steel Co., Ltd
(“Meijin Steel”) which is owned by Meijin Energy.
NOW THEREFORE, in consideration of the
mutual promises and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1.
GENERAL PROVISIONS
The
Parties enter this Agreement in accordance with the "Law of Establishing Joint
Venture by Chinese and Foreign Investment in the People’s Republic of China
(“PRC”)" and other relevant published laws and regulations of
China.
The
purposes of the joint venture shall be to integrate and expand Meijin Steel
which is owned by Meijin Energy. Meijin Steel is located in Xigaobai village,
Dongyu town, Qingxu county, Shanxi province. After the integration, Meijin Steel
will reach a comprehensive production capacity of 3 million tons annual capacity
of crude steel .
2.
NOTICE
2.1 Any notices required or
permitted hereunder shall be given to the appropriate party at the address
specified in this section or at such other address as either party shall specify
in writing. Such notice shall be deemed given: upon personal
delivery; if sent by telephone facsimile, upon confirmation of receipt; or if
sent by certified or registered mail, postage prepaid, five (5) days after the
date of mailing.
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For
Shanxi Meijin Energy Group Co., Ltd:
Legal
Representative: Yao ▇▇ ▇▇▇
Meijin
North Avenue No. 2,
Qingxu county, Taiyuan city, Shanxi
province
China
For
General Steel Holdings:
Chairman
and CEO: Yu Zuo Sheng
Room 2315, Kun Tai International
Mansion Building,
Yi ▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇.,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
General
Steel is a U.S.-listed company, incorporated in the United States. Headquartered
in Beijing, General Steel manages and operates a number of Chinese steel
subsidiaries reaching a comprehensive production capacity 6.3 million tons of
steel annually. General Steel’s subsidiaries are located in ▇▇▇▇▇’xi, Inner
Mongolia Autonomous Region and the Tianjin municipality, and operate directly
under the Central Government and Guangdong province, producing and processing a
variety of steel products.
2.2
Joint Venture
In
accordance with the "Law of Establishing Joint Venture by Chinese and Foreign
Investment in the People’s Republic of China" and other relevant published laws
and regulations of China, the Parties agree to establish a Joint Venture
Limited Liability Company (hereinafter referred to as "Joint Venture" or “JV”)
in Shanxi, China.
The name
of the Joint Venture shall be: Shanxi Meijin Iron and Steel Co., Ltd. and the
legal address of the Joint Venture will be located at Xigaobai village, Dongyu
town, Qingxu county, Shanxi province, Peoples’ Republic of China. 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.
The Joint
Venture shall be organized as a limited liability company. Except as may be
claimed by one Party against the other Party (but not any third parties) under
Section 14 (as limited by Section 20), the liability of each Party is limited to
making contribution to the registered capital in accordance with Section 5 of
this Agreement, including each Party's stake in all other capital increases
calculated in compliance with the Chinese regulations, and is further limited
pursuant to Section 20 of this Agreement.
3.
REGISTERED CAPITAL AND OWNERSHIP
Meijin
Energy shall retain forty five percent (45%) of the ownership interest in the
Joint Venture and General Steel shall own fifty five percent (55%) of the
ownership interest in the Joint Venture. General Steel will contribute RMB440
million (approximately $64,700,000) in cash or stock to purchase its fifty five
percent (55%) of the ownership interest in the Joint Venture which is currently
100% owned by Meijin Energy. Meijin Energy will contribute facilities,
inventory, equipment and land usage rights with an aggregate value equal to
RMB360 million (approximately $52,936,364) for its forty five percent (45%) of
the ownership interest in the Joint Venture.
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4.
PURPOSES, SCOPE AND SCALE OF PRODUCTION AND BUSINESS
The
purposes of the Joint Venture are to integrate and expand Meijin Steel owned by
Meijin Energy such that the Joint Venture will then own Meijin Steel and have
the expectation that the Joint Venture will reach a comprehensive production
capacity of 3 million tons annual capacity of crude steel annually after being
integrated.
5.
RESPONSIBILITIES OF THE PARTIES
5.1 The responsibilities of
Meijin Energy include being compliant and cooperative with audits and the asset
evaluation required for listed companies and effectively working together with
the staff dispatched by General Steel for equipment checking and testing. In
addition, Meijin Energy shall guarantee the consumption of water, electricity,
natural gas, coke, fine iron ore, lime, as well as transport methods, all at
levels to be established from time to time in the reasonable discretion of
General Steel, and shall ensure that the supply prices are under the market
prices.
5.2 The responsibilities of
General Steel shall include providing financial support to the Joint Venture
deemed necessary by General Steel in accordance with this Agreement or as
otherwise agreed upon by the Parties, appointing a CFO to provide assistance in
adapting the financial principles to the requirements of U.S.-listed companies
and assisting the Joint Venture to reach production capacity goals.
6.
SALES OF PRODUCTS
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 (as defined below) following the
recommendation of the board of directors taking into account domestic market
conditions, competitiveness of the products and the economic situation of the
Joint Venture. The General Manager of the Joint Venture shall be free to
determine prices of and sell its products.
7.
BOARD OF DIRECTORS
7.1 A board of directors (the
“Board”) shall be established by the Joint Venture within one month after the
date the Joint Venture is issued a Business License.
7.2 The Board shall consist of
five (5) directors. Among of the five directors, Meijin Energy will appoint two
(2) directors and General Steel will appoint three (3) directors. In the event
that any director resigned or is removed, the Party that appointed said director
shall have the right to appoint a replacement.
7.3 The Board shall approve
all major actions concerning the Joint Venture. In reaching decisions the board
of directors shall consult the participants and shall strive for equitable and
mutually beneficial results. All actions that require approval from the board of
directors shall be approved by at least four fifths of the members of the
Board.
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In
addition, the following actions will require the unanimous approval of all the
members of the Board:
a.
Amending of the articles of association of the joint venture;
b. Terminating, dissolving or winding
down of the Joint Venture;
c. Increasing the registered capital of
the Joint Venture;
d. Transferring ownership of the Joint
Venture; or
e.
Merging the Joint Venture with another organization.
7.4 The Board shall
have a chairman (the “Chairman”) and a vice chairman (the “Vice Chairman”) each
of whom shall be elected by a majority of the Board. The Chairman
shall be the legal representative of the joint venture and shall serve in that
capacity until his or her resignation or at least the majority of the Board
elects his or her successor or replacement. In the event the Chairman
be unable to exercise his responsibilities, he should authorize the Vice
Chairman to represent the Joint Venture. The Board, if
acting pursuant to action approved by the majority of the
Board, shall have the power to remove and replace the Chairman or
Vice Chairman at anytime.
7.5 The board of
directors shall convene for at least one meeting every year. The meeting shall
be called and presided over by the Chairman. The general manager and the deputy
general manager (as defined below) shall have the right to attend the meeting. A
Board meeting shall be held at a site as agreed upon by the Parties to the Joint
Venture. The Chairman shall convene an interim meeting to vote on any proposal
brought forth by more than one fifth of the directors. Minutes of every Board
meeting shall be kept and shall be put on the books and records of the Joint
Venture. The directors shall have the power to assign their powers to
a designated representative who shall then be able to act on behalf of that
director.
7.6 An action
approved by written consent of the board of directors shall have the same
validity as an action approved during an official board meeting.
8.
BUSINESS MANAGEMENT ORGANIZATION
8.1 The Joint Venture shall
have a general manager (the “General Manager”) and a deputy general manager (the
“Deputy General Manager”), each of whom shall be elected by a majority of the
Board and who shall be responsible for its daily management as
described in Section 8.2 below.
8.2 The responsibilities of
the General Manager shall include carrying out the decisions of the board and
organizing and directing the daily management of the Joint Venture in accordance
with the provisions of this Agreement and the articles of association. The
Deputy General Manager shall assist the General Manager in such duties. In
addition, there shall be department managers who will be responsible for the
work in the departments of production, technology, business operation, finance
and administration. In addition, the department managers shall be
responsible for matters assigned by the General Manager and the Deputy General
Manager and shall report to them. The General Manager shall attend the annual
Board meeting, oversee the yearly budget, appoint the department
managers and determine their salaries.
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8.3 The General Manager and
Deputy General Manager shall work exclusively for the Joint Venture and shall
not or act on behalf of any other organization except that either of them may be
an officer, director or employee of other Party. The board of directors shall
have the power to terminate the General Manager and the Deputy General
Manager.
9.
LABOR MANAGEMENT
9.1 Policies relating to
matters such as the total number of workers, recruitment, terminations, wages,
welfare, benefits, labor insurance, bonuses and labor discipline shall be
determined by the General Manager in accordance with Labor Law of the "People's
Republic of China Administration on Labor Management of Foreign Investment
Enterprises Provisions" and other promulgated relevant PRC laws and regulations,
the policies stipulated by the board of directors, and the financial conditions
of the Joint Venture.
9.2 The General Manager,
acting on behalf the Joint Venture, will sign individual labor
contracts
with each of its employees. Each labor contract shall include type of work,
technical ability and wages of such employee according to the framework duly
approved by the board of directors and shall be filed for reference at the local
labor management department.
9.3 The labor contracts of all
staff and workers likely to receive Confidential information and/or particular
training from the Joint Venture or from General Steel shall include, in addition
to confidentiality clauses, non-competition clauses pursuant to which an
employee shall not be entitled to work for any organization in the same field as
the joint venture or any of the Parties for a period of two (2) years after
leaving the Joint Venture.
10.
TAXES, FINANCE, AUDIT AND PROFIT DISTRIBUTION
10.1 The Joint Venture shall
pay various taxes in accordance with relevant Chinese laws and
regulations
10.2 Employees of the Joint
Venture shall be responsible for paying their own individual income tax or
personal income adjustment tax in accordance with relevant PRC laws and
regulations. Expatriate employees of the Joint Venture can remit their money
abroad after paying taxes in the PRC.
10.3 In accordance with the
"Laws of the People's Republic of China on the Joint Ventures using Chinese and
Foreign Investment," allocations shall be made for a reserve fund, an enterprise
expansion fund, bonuses and welfare funds for the staff and
workers. Such allocations shall be determined by the board of
directors each year taking into account the economic situation of the Joint
Venture and its after tax profit but at no time shall the total of these funds
exceed eight percent (8%) of the total profit of the Joint Venture.
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10.4 Accounting for the Joint
Venture shall be performed in accordance with the "Regulations of the People's
Republic of China on the Financial Administration for Foreign Investment
Enterprises" and the "Accounting System for the Foreign
Investment Enterprises." The fiscal year of the Joint Venture shall
be from January 1 to December 31 of each year. All vouchers, receipts,
statistical statements, reports and account books shall be written in Chinese,
provided that any such documents shall be translated into English upon request
by General Steel. Monthly, quarterly and annual financial reports shall be
prepared in both Chinese and in English and submitted to the board of
directors.
10.5 The Joint Venture shall
engage an accountant registered in China mutually agreed upon by both Parties to
conduct its annual financial audit and examination and to provide a report for
submission to the board of directors and the General Manager. In the event that
General Steel considers it necessary, a foreign auditor may be engaged to
conduct a separate annual financial audit.
10.6 All disbursements shall
be signed by the General Manager or his authorized agent.
11.
TERM OF THE JOINT VENTURE
11.1 Subject to Section 14,
the term of the Joint Venture shall be 30 years from the date a business license
is issued to the Joint Venture. The term can be extended with notice by either
party six months prior to the 30 year termination date, subject to the approval
by the board of directors pursuant to Section 7.3 above.
12.
DISPOSAL OF ASSETS UPON LIQUIDATION OF THE JOINT VENTURE
12.1 Upon termination of the
Joint Venture, a liquidation shall be carried out according to relevant laws and
regulations. The liquidated assets shall be distributed pro rata to the capital
contribution made by the Parties.
13.
INSURANCE
13.1 The Joint Venture shall
maintain appropriate insurance policies with an insurance company in PRC. The
types, value and duration of insurance shall be decided by the board of
directors in accordance with the insurance standards in the PRC. The Joint
Venture shall maintain insurance for all staff and workers in conjunction with
the local labor management department.
14.
AMENDMENT, ALTERATION AND TERMINATION OF CONTRACT
14.1 This Agreement may only
be amended by written agreement signed by the Parties.
14.2 The Joint Venture and
this Agreement may be terminated prior to the end of the term upon a unanimous
vote of the board of directors subject to any required approval of any approval
authority. In the event of such termination, the registration of the Joint
Venture shall be canceled at the original registration office. The Joint Venture
may be terminated prior to end of the term in the event that both Parties agree
that termination of the Joint Venture is the mutual and the best interest of the
Parties.
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14.3 If either Party is unable
to fulfill its obligations under this Agreement and the articles of association
and as a result the Joint Venture cannot continue its normal business or cannot
reach goals set forth in this Agreement, then the Agreement shall have been
deemed to be breached by that Party. In the event of a breach, the
breaching Party shall have thirty (30) days to cure such breach after it
receives notice from the non-breaching Party. In the event a breach goes uncured
for thirty (30) days after notice, the non-breaching Party shall have the right
to claim damages and terminate this Agreement. Alternatively, in the event of a
breach that is not cured within thirty (30) days of notice, the non-breaching
Party shall have the right to continue the business and be compensated for any
economic damages as a result of such breach and the non-breaching party shall
have the right to purchase the ownership interest of the breaching Party for the
fair market value as determined by the Parties or pursuant to Section 17
below.
14.4 Approval of all Parties
shall be required for the Joint Venture to merge with or acquire another
entity.
15.
FORCE MAJEURE
15.1 Should the performance of
this Agreement be directly affected or should it become impossible for either
Party to perform its obligations under this Agreement as a result of a force
Majeure event such as earthquake, typhoon, flood, fire, war, civil disorder,
unforeseeable events where the occurrences and consequences are unpreventable
and unavoidable without limitation, the Party affected by such event shall
notify the other Party by telephone, e-mail, telegram or facsimile without any
delay and, within fifteen (15) days thereafter, provide detailed
information on such event and a valid certification document providing evidence
for such Party's inability to perform all or part of this Agreement or its delay
of the performance.
15.2 If possible, the
certification document shall be issued by a notary public office at the location
where the force Majeure event occurs. The non-affected party shall decide
whether to terminate this Agreement or to waive part of the obligations to be
performed under this Agreement or to delay the performance of this
Agreement.
16.
APPLICABLE LAW
16.1 The execution, validity,
interpretation and performance of this Agreement and dispute resolution under
this Agreement shall be governed and protected by the laws of the
PRC.
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17.
DISPUTE RESOLUTION
17.1 Any disputes arising from
the execution of or in connection with this Agreement shall first be
settled through friendly discussions between the Parties. In the event that no
settlement can be reached through discussions, the dispute shall be first
submitted to the China International Economic and Trade Arbitration Commission
for conciliation. If no settlement can be reached within 90 days after the
beginning of this procedure, the claim will be submitted and settled through the
rules and the procedure of the International Chamber of Commerce (Paris). The
arbitration will be held in Paris, France, the English language will be used,
and any decision shall be final and unappealable by the losing Party. The
arbitration fee shall be borne by the losing Party.
17.2 While a dispute,
controversy or claim arising out of or in connection with
this Agreement is being resolved either through friendly consultation
or through arbitration, the Parties shall not hinder or affect the performance
of their obligations hereunder, other than those in dispute, so as to ensure the
smooth operation of the Joint Venture to the greatest extent
possible.
18.
LANGUAGE
18.1 This Agreement is written
in Chinese and English and both languages are equally authentic.
19.
EFFECTIVENESS OF AGREEMENT AND MISCELLANEOUS
19.1 The business
licenses and board resolutions approving the Joint Venture Agreement (the
“Annexes”) shall be integral parts of this Agreement. In the event of any
discrepancy between this Agreement and any other agreement, the provisions of
this Agreement shall prevail.
19.2 This Agreement
and the agreements referenced in Section 19.1 above shall become effective
subject to the successful purchase of a production line and upon approval by any
necessary approval authority.
19.3 This
Agreement, together with its Annexes, constitute the entire agreement of the
Parties with respect of the subject matters hereof and shall supersede all prior
agreements between the Parties with respect to the matters hereof.
19.4 The Parties
shall take all such efforts to carry out the purposes of this Agreement and its
Annexes. Neither Party shall take any action that might have an adverse
competitive effect or adverse consequence on the operation of the Joint Venture
without first getting approval from the other Party.
19.5 Any waiver by
either Party at any time of a breach of any term or provision of this Agreement
shall not be construed as a waiver by such a Party of any
subsequent breach, its rights to such term or provision, or any of
its other rights hereunder.
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19.6 If any one or
more of the provisions contained in this Agreement or the Annexes hereto shall
be invalid, illegal or unenforceable in any respect under any applicable law,
the validity legality and enforceability of the remaining provision contained
herein or therein shall not in any way be affected or impaired.
19.7 Unless
otherwise specifically provided, notices or other communications to either Party
required or permitted hereunder shall be: (a) personally delivered;
(b) transmitted by postage prepaid registered airmail or by
international courier; or (c) transmitted by telex or facsimile with answer-back
or followed by registered airmail or air courier.
19.8 This Agreement may be
executed in one or more counterparts each of which shall be deemed an original
and all of which shall be taken together and deemed to be one
instrument. Each Party hereto shall receive one original in both
Chinese and English.
20.
LIMITATIONS OF LIABILITY
20.1 IN NO EVENT SHALL ANY
PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL LOSSES OR
DAMAGES OF ANY KIND OR NATURE WHATSOEVER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, INCLUDING WITHOUT LIMITATION LOST PROFITS, LOST RECORDS OR DATA,
INCREASED EXPENSE OR COSTS, EVEN IF THE POSSIBILITY OF SUCH LOSS OR DAMAGE COULD
HAVE BEEN REASONABLY FORESEEN.
20.2 NO ACTION,
WHETHER IN CONTRACT, TORT OR OTHERWISE ARISING UNDER THIS AGREEMENT MAY BE
BROUGHT BY EITHER PARTY MORE THAN TWELVE (12) MONTHS AFTER THE CAUSE OF ACTION
OCCURS.
21.
CONFIDENTIALITY
21.1 The Parties
agree not to disclose to any third party information relating to the other
parties, their agents, or their clients, if such information could reasonably be
construed as confidential. For the purpose of this paragraph, “Confidential
Information” includes, but is not limited to, (including tangible, intangible,
and oral and written) (a) any technical, or business information, designs,
inventions, manufacturing technique, process, experimental work, program,
software or trade secret relating to products, systems, equipment, services,
sales, client lists, research or business of the Parties, their members or
subsidiaries; (b) documents marked "Confidential"; and (c) documents, plans,
prints, tapes, disks, and other material containing any of the
foregoing.
21.2 The Parties
shall safeguard the Confidential Information using at least as great a degree of
care as each uses to safeguard its own most confidential information (but in no
event, less than a reasonable degree of care) so that no unauthorized person
shall have access to it, and that no unauthorized persons shall have access to
make copies of the Confidential Information. Without limitation of the
foregoing, the Parties shall advise the other party immediately in the event
that it learns or has reason to believe that any person who has had access to
the Confidential Information has violated or intends to violate the terms of
this Agreement, and the Parties shall, at their own expense, cooperate with the
injured party in seeking injunctive or other equitable relief against any such
person.
22. CONDITIONS
TO DEFINITIVE AGREEMENT
The
Parties hereby acknowledge and agree that this Agreement is intended to set
forth the preliminary terms of the Joint Venture that is anticipated to be
consummated hereunder and that following the receipt and review of a written
appraisal and related due diligence materials pertaining to Meijin Steel and
satisfactory to General Steel, the Parties will execute a definitive agreement
that shall establish the final terms and provisions to consummate and govern the
Joint Venture.
[Signature
page to follow]
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| Shanxi Meijin Energy Group Co., Ltd. | General Steel Holdings, Inc. | |||
|
Signature:
|
/s/ Yao Jun Huo |
Signature:
|
/s/ ▇▇▇▇▇▇▇▇ ▇▇ | |
|
|
|
|||
|
By:
|
Yao Jun Huo |
By:
|
▇▇▇▇▇▇▇▇ ▇▇ | |
| (Print Name) | (Print Name) | |||
| Title: | Legal Representative | Title: | Chairman and CEO | |
| Address: | Meijin North Avenue No. 2 | Address: | Room 2315, Kun Tai International Mansion Building | |
| Qingxu County, Taiyuan City | Yi ▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. | |||
| ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ | ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| ▇▇▇▇▇ | ||||
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