EX-10.10






Exhibit 10.10




EQUITY JOINT VENTURE CONTRACT




BETWEEN




CHINA HYDROELECTRIC CORPORATION




AND




SANMING CITY CHENYANG HYDROELECTRIC CO., LTD




FOR THE ESTABLISHMENT OF




PINGNAN COUNTY WANGKENG HYDROELECTRIC




CO., LTD.




10 August 2008




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	PRELIMINARY STATEMENT
	 	 	4	 
	 
	 	 	 	 
	ARTICLE 1 PARTIES TO THE CONTRACT
	 	 	4	 
	 
	 	 	 	 
	1.1
Parties
	 	 	4	 
	 
	 	 	 	 
	ARTICLE 2 DEFINITIONS
	 	 	4	 
	 
	 	 	 	 
	2.1
Definitions
	 	 	4	 
	 
	 	 	 	 
	ARTICLE 3 ESTABLISHMENT AND LEGAL FORM OF THE JV COMPANY
	 	 	5	 
	 
	 	 	 	 
	3.1
Establishment of the JV
Company
	 	 	5	 
	3.2
Name and Address of the JV
Company
	 	 	6	 
	3.3
Legal Form
	 	 	6	 
	3.4
Laws and Decrees
	 	 	6	 
	 
	 	 	 	 
	ARTICLE 4 PURPOSE AND SCOPE OF BUSINESS
	 	 	6	 
	 
	 	 	 	 
	4.1
Purpose of the JV Company
	 	 	6	 
	4.2
Scope of Business of the JV
Company
	 	 	6	 
	 
	 	 	 	 
	ARTICLE 5 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
	 	 	6	 
	 
	 	 	 	 
	5.1
Total Investment
	 	 	6	 
	5.2
Registered Capital
	 	 	6	 
	5.3
Capital Contribution
	 	 	7	 
	5.4 Capital Verification
	 	 	 	 
	5.5 Increase or Adjustment of Total Investment and/or Registered Capital
	 	 	7	 
	5.6 Assignment of Equity Interests
	 	 	7	 
	5.7 Encumbrance on Equity Rights
	 	 	7	 
	5.8 Financing
	 	 	8	 
	 
	 	 	 	 
	ARTICLE 6 RESPONSIBILITIES OF THE PARTIES
	 	 	9	 
	 
	 	 	 	 
	6.1 Responsibilities and Rights of Party A
	 	 	9	 
	6.2 Responsibilities and Rights of Party B
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 7 REPRESENTATIONS AND WARRANTIES; INDEMNITY
	 	 	9	 
	 
	 	 	 	 
	7.1 Representations and Warranties of Party A
	 	 	9	 
	7.2 Representations and Warranties of Party B
	 	 	10	 
	7.3 Indemnity
	 	 	11	 
	 
	 	 	 	 
	ARTICLE 8 BOARD OF DIRECTORS
	 	 	11	 
	 
	 	 	 	 
	8.1 Formation of the Board of Directors
	 	 	11	 
	8.2 Indemnification of Directors
	 	 	11	 
	8.3 Meetings of the Board
	 	 	12	 
	8.4 Powers of the Board
	 	 	13	 
	8.5
Written Resolutions
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 9 MANAGEMENT ORGANIZATION
	 	 	15	 
	 
	 	 	 	 
	9.1 Management Organization
	 	 	15	 
	9.2 Appointment and Replacement of Senior Management Personnel
	 	 	15	 
	9.3 Scope of Senior Management Authority and Performance of Duties
	 	 	15	 
	9.4 Management Structure
	 	 	16	 
	 
	 	 	 	 
	ARTICLE 10 SUPERVISOR
	 	 	16	 
	 
	 	 	 	 
	10.1 Supervisor
	 	 	16	 
	10.2 Term of Office
	 	 	16	 
	10.3 Qualifications
	 	 	16	 
	10.4 Powers of the Supervisor
	 	 	16	 






 









 






	 	 	 	 	 
	ARTICLE 11 LABOUR MANAGEMENT
	 	 	17	 
	 
	 	 	 	 
	11.1 Governing Principle
	 	 	17	 
	11.2 Employment Examination and Recruitment
	 	 	17	 
	11.3 Conformity with Labour Protection
	 	 	17	 
	11.4 Trade Union
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 12 FINANCIAL AFFAIRS AND ACCOUNTING
	 	 	17	 
	 
	 	 	 	 
	12.1 Accounting System
	 	 	18	 
	12.2 Financial Year
	 	 	18	 
	12.3 Auditors
	 	 	18	 
	12.4 Bank Accounts and Foreign Exchange Control
	 	 	18	 
	 
	 	 	 	 
	ARTICLE 13 DISTRIBUTION OF PROFITS
	 	 	18	 
	 
	 	 	 	 
	13.1 Distribution of Profits
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 14 TAXATION AND INSURANCE
	 	 	19	 
	 
	 	 	 	 
	14.1 Income Tax and Other Tax
	 	 	19	 
	14.2 Insurance
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 15 CONFIDENTIALITY AND NON-COMPETITION
	 	 	19	 
	 
	 	 	 	 
	15.1 Confidentiality
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 16 DURATION OF THE JV COMPANY
	 	 	20	 
	 
	 	 	 	 
	16.1 Duration of the JV Company
	 	 	20	 
	16.2 Extension of the duration
	 	 	20	 
	 
	 	 	 	 
	ARTICLE 17 MERGER, DIVISION, BANKRUPTCY, TERMINATION AND LIQUIDATION
	 	 	21	 
	 
	 	 	 	 
	17.1 Merger or Division
	 	 	21	 
	17.2 Bankruptcy or Insolvency
	 	 	21	 
	17.3 Termination and Dissolution
	 	 	21	 
	17.4 Liquidation
	 	 	21	 
	 
	 	 	 	 
	ARTICLE 18 EVENT OF DEFAULT
	 	 	22	 
	 
	 	 	 	 
	18.1 Event of Default
	 	 	22	 
	18.2 Consequences of an Event of Default
	 	 	23	 
	 
	 	 	 	 
	ARTICLE 19 FORCE MAJEURE
	 	 	23	 
	 
	 	 	 	 
	19.1 Force Majeure
	 	 	23	 
	 
	 	 	 	 
	ARTICLE 20 SETTLEMENT OF DISPUTES
	 	 	23	 
	 
	 	 	 	 
	20.1 Arbitration
	 	 	23	 
	20.2 Effect of Arbitration Award
	 	 	23	 
	20.3 Costs
	 	 	24	 
	20.4
Continuing Rights and Obligation
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 21 APPLICABLE LAW
	 	 	24	 
	 
	 	 	 	 
	21.1 Applicable Law
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 22 MISCELLANEOUS PROVISIONS
	 	 	24	 
	 
	 	 	 	 
	22.1 Waiver
	 	 	24	 
	22.2 Assignment
	 	 	24	 
	22.3 Amendment
	 	 	24	 
	22.4 Severability
	 	 	24	 
	22.5 Language
	 	 	24	 
	22.6 Notices
	 	 	25	 
	22.7 Effectiveness
	 	 	25	 
	22.8 Entire Agreement
	 	 	25	 






 









 






EQUITY JOINT VENTURE CONTRACT OF PINGNAN COUNTY WANGKENG

HYDROELECTRIC CO., LTD.




PRELIMINARY STATEMENT



This Equity Joint Venture Contract (hereinafter referred to as this “Contract”) is entered into in
Fuzhou City, the People’s Republic of China (hereinafter referred to as the “PRC”) on the
10th day of August 2008, by and between China Hydroelectric Corporation and Sanming City
Chenyang Hydroelectric Co., Ltd in accordance with the Law of the PRC on Sino-Foreign Equity Joint
Ventures and the implementation regulations issued thereunder (collectively, the “Equity Joint
Venture Law”), the Company Law of the PRC (the “Company Law”) and other relevant laws and
regulations of the PRC. After friendly consultations conducted in accordance with the principles of
equality and mutual benefit, the Parties have agreed to establish a Sino-foreign equity joint
venture enterprise Pingnan County Wangkeng Hydroelectric Co., Ltd. (hereinafter referred to as the
“JV Company”) in Pingnan County, Fujian Province on the basis set forth below:




ARTICLE 1 PARTIES TO THE CONTRACT




1.1 Parties





	 	(1)	 	Party A: China Hydroelectric Corporation, a company registered and established in accordance
with the laws of the Cayman Islands, with its registered address at 558 Lime Rock Road, Lime
Rock, Connecticut 06039, the authorized representative is John D. Kuhns, whose position is
Chairman and nationality is the United States of America.
	 
	 	(2)	 	Party B: Sanming City Chenyang Hydroelectric Co., Ltd., a company registered and established
in accordance with the laws of the People’s Republic of China, with its registered address at
Shunkeng Hydropower Station, Shenkou, Sanyuan District, and the registration number of
350400100017627, the legal representative of which is Huang Shaojian, whose nationality is
People’s Republic of China.





ARTICLE 2 DEFINITIONS




2.1 Definitions





Unless otherwise provided herein, the following terms used in this Contract shall have the
meanings set forth below:




“Affiliate” means, with respect to any entity, any other entity, which, directly or
indirectly, is controlled by, under common control with, or in control of, such entity; the
term “control” shall mean ownership of not less than fifty percent (50%) of the voting
stock or registered capital, or the power to appoint or elect a majority of the directors
or to direct the management of an entity.




“Approval Authorities” means the governmental departments, authorized under the laws and
regulations of the PRC regarding the examination and approval of foreign investment
projects, which have the power to examine and approve this Contract and the Articles of
Association.



Page 4 of 26









 






“Articles of Association” means the articles of association of the JV Company executed by each of
the Parties immediately following execution of this Contract and any amendment thereto approved in
accordance with the provisions of this Contract.




“Board of Directors” or “Board” means the Board of Directors of the JV Company from time to time as
referred to in this Contract.




“Business License” means the business license of the JV Company issued by the State Administration
for Industry and Commerce or, if authorized, the relevant competent local Administration for
Industry and Commerce.




“Effective Date” means the effective date of this Contract, which shall be the first date upon
which this Contract and the Articles of Association are approved by the relevant competent Approval
Authorities.




“Encumber” means to, directly or indirectly, pledge, mortgage, grant a security interest, or
otherwise encumber, or enter into any contract, any voting trust or other agreement or arrangement
therefor, and “Encumbrance” shall have correlative meanings.




“Equity Interests” means, in respect of any Party, its capital contribution to the JV Company in
accordance with the terms of this Contract and all rights in relation to the JV Company accruing to
and/or enjoyed by such Party as a result of such capital contribution including, without
limitation, voting rights and rights to profits.




“Event of Default” means an event of default as set forth in Article 18 hereof.




“JV Company” means the Sino-foreign equity joint venture company to be established by the
Parties under the terms of this Contract and the laws of the PRC, namely, Pingnan County Wangkeng
Hydroelectric Co., Ltd.




“Liquidation Committee” has the meaning ascribed to it in Article 17 hereof.




“Senior Management Personnel” means the JV Company’s General Manager, Deputy General Managers,
Chief Accountant and any other Senior Management Personnel who report directly to the General
Manager.




“Parties” means, collectively, Party A and Party B; “Party” means any one of them.




“PRC” means the People’s Republic of China.




“RMB” or “Renminbi” means the legal currency of the PRC.




“Signing Date” means the date on which this Contract is signed.




“Third Party” means any other natural person, legal person or other organization or entity other
than the Parties to this Contract.




“Three Funds” means the JV Company’s reserve fund, expansion fund and employee bonus and welfare
fund constituted in accordance with and subject to the applicable regulations governing equity
joint ventures in the PRC.



ARTICLE 3 ESTABLISHMENT AND LEGAL FORM OF THE JV COMPANY




3.1 Establishment of the JV Company





Page 5 of 26









 









The Parties hereby agree to establish and operate the JV Company as a Sino-foreign equity joint
venture enterprise in accordance with the Equity Joint Venture Law and other relevant PRC laws and
regulations and the provisions of this Contract.



3.2 Name and Address of the JV Company





	 	(1)	 	The name of the JV Company shall be “” in Chinese and “Pingnan County
Wangkeng Hydroelectric Co., Ltd.” in English.
	 
	 	(2)	 	The legal address of the JV Company shall be Wangkeng Village, Tangkou Township, Pingnan
County.





3.3 Legal Form





The JV Company shall be a limited liability company with independent legal status. The liability of
each of the Parties for the debts and obligations of the JV Company shall be limited to its
respective contribution to the registered capital, and shall be subject to the conditions, set out
in accordance with Article 5 hereof. The profit, risks and losses of the JV Company shall be shared
by the Parties in proportion to their contributions to the registered capital. The JV Company shall
assume liabilities with all of its assets



3.4 Laws and Decrees





The activities of the JV Company shall be governed by the laws, decrees and relevant regulations of
the PRC, and its legitimate rights and interests shall be protected by such laws, decrees and
relevant regulations.



ARTICLE 4 PURPOSE AND SCOPE OF BUSINESS




4.1 Purpose of the JV Company





The purpose of the Parties in establishing the JV Company and in entering into this Contract is to
enhance economic co-operation and technical exchanges, by adopting advanced and applicable
technology and scientific management methods, so as to improve economic results and ensure
satisfactory economic benefits for each investor.


        .

4.2 Scope of Business of the JV Company





The scope of business of the JV Company shall be: development, operation and management of
hydropower generation.



ARTICLE 5 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL




5.1 Total Investment





The total investment of the JV Company shall be RMB102,000,000.



5.2 Registered Capital





The total amount of the JV Company’s registered capital shall be RMB 40,800,000.



Page 6 of 26









 





5.3 Capital contribution





The subscribed capital contribution of each Party shall be an aggregate amount as follows:




Party A: shall contribute in US dollar equivalent to RMB 36,720,000, representing ninety percent
(90%) of the registered capital of the JV                Company;




Party B: shall contribute in cash in the amount of RMB4,080,000, representing ten percent (10%) of
the registered capital of the JV                Company.



5.4 Increase or Adjustment of Total Investment and/or Registered Capital





Any increase or adjustment of the total investment and/or registered capital of the JV Company
shall be subject to the written agreement of each Party, the unanimous approval of each Director
and the approval of the Approval Authorities. The Parties shall cooperate in endeavoring to obtain
all approvals that may be required for any such increase or adjustment. Upon receipt of the
required approval for any such increase or adjustment, the JV Company shall promptly register the
changes with the relevant Administration for Industry and Commerce.



5.5 Assignment of Equity Interests





	 	(1)	 	Neither of the Parties shall transfer or assign all or any part of its Equity Interests in the
JV Company to any Third Party without (i) written approvals of the Approval Authorities and (ii)
the transferee executing and delivering a legally binding document in a form reasonably
satisfactory to the other Parties under which it agrees to be bound by the terms and conditions of
this Contract as though it had been a Party.
	 
	 	(2)	 	Where a Party intends to transfer or assign all or any part of its Equity Interests to any
Third Party, that Party shall first offer to sell to the other Party, and the other Party shall
have a pre-emptive right to purchase such Equity Interests at the same price and on the same terms
and conditions as the intended transfer or assignment to any Third Party.
	 
	 	(3)	 	Each such offer shall be made by a notice specifying the price and terms and conditions and the
Equity Interests which are on offer. The notice shall invite the recipient to state in writing
within a period of ten (10) days whether it is willing to purchase any Equity Interests and, if so,
it shall purchase all Equity Interests indicated in the offer notice.
	 
	 	(4)	 	At the expiration of the time stipulated by the offer pursuant to Article 5.5(3), the Party who
intends to transfer or assign all or any part of its Equity Interests shall, subject to the written
approvals of the Approval Authorities, transfer or assign its Equity Interests to or amongst the
other Parties who have notified their willingness to take any of the Equity Interests offered.
Subject to applicable PRC laws and regulations, any Equity Interests not purchased by the other
Party may, at the discretion of the Party which made the offer to the other Party, be transferred
or assigned to any Third Party at the price and on the terms and conditions not less favorable than
those offered to the other Party.
	 
	 	(5)	 	The transfer of equity interest shall be carried out in accordance with relevant provisions of
the Company Law.





5.6 Encumbrance on Equity Rights





Neither of the Parties shall, without the written consent of the other Party, encumber all or any
part of its Equity Interests.



Page 7 of 26









 





5.7 Financing





	 	(1)	 	Should additional funding be required by the JV Company, the following methods in order of
priority shall be adopted:






	 	1)	 	Financing from banks and financial institutions;
	 
	 	2)	 	Loans from the Parties (“Shareholders’ Loans”); or
	 
	 	3)	 	Increase in registered capital of the JV Company.






	 	(2)	 	The Parties shall jointly co-operate and undertake to exercise their best endeavors to secure
financing for the JV Company from banks and other financial institutions (“External Financing”) on
the best available commercial terms. External Financing for the JV Company shall be procured using
the JV Company’s assets as security, if necessary, and, wherever possible, without any additional
security or guarantee being provided by the Parties.
	 
	 	(3)	 	In the event that any support from the Parties (whether by way of loans, security, guarantees,
indemnities, warranties or other undertakings) (“Financial Support”) is required to be given by the
Parties in respect of the JV Company, to finance or to secure any financing for the JV
Company, the Parties shall provide Financial Support in proportion to their respective prevailing
shareholding percentages and on a several basis. In the event that any Party provides less than its
respective proportion of Financial Support and such portion of Financial Support is provided or
borne by another Party (the “Responsible Party”):






	 	(a)	 	the first Party shall, in respect of such portion of Financial Support provided or borne by the
Responsible Party (“Additional Financial Support”), indemnify the Responsible Party in full for any
losses, liabilities, costs (including without limitation, legal costs on a full indemnity basis),
charges, expenses, actions, proceedings, claims and demands incurred by the Responsible Party as a
result thereof; and
	 
	 	(b)	 	in the event that the Additional Financial Support by the Responsible Party is in the form of
Shareholders’ Loan, then, after the consultations between the Parties, subject to all applicable
PRC laws, regulations and necessary approvals of PRC governmental authorities, notwithstanding
anything provided in this Contract, the Responsible Party shall be entitled, at its sole and
absolute discretion and at any time upon request, to additional equity interests in the registered
capital of the JV Company based on proportion to Shareholders’ Loan contributed by the Responsible
Party and through the conversion of the Additional Financial Support from loan to additional equity
interests and without the payment of any additional consideration or price for such additional
equity interests.






	 	(4)	 	All Shareholders’ Loans shall, unless otherwise agreed to by both Parties or provided by any
PRC laws or regulations, be on the following terms:-






	 	(a)	 	bearing interest at a rate mutually agreed by the Parties and in compliance with all applicable
PRC laws and regulations and applicable equally to both Parties;
	 
	 	(b)	 	unless otherwise agreed by the providers of the JV Company’s External Financing, be
subordinated to all External Financing; and
	 
	 	(c)	 	shall not be assignable without the JV Company’s prior written consent other than in
connection with the transfer of Equity Interests and for the purposes of assigning such loan to the
transferee.






	 	(5)	 	In the event that the Parties agree that each shall borrow funds from banks or financial
institutions in order to furnish Shareholders’ Loans to the JV Company.




Page 8 of 26









 











ARTICLE 6 RESPONSIBILITIES OF THE PARTIES




6.1 Responsibilities and Rights of Party A





In addition to its other rights and obligations under this Contract, Party A shall have the
following rights and take the following responsibilities:




	 	(1)	 	to make its contributions to the registered capital of the JV Company in accordance with this
Contract;
	 
	 	(2)	 	to manage and operate the JV Company;
	 
	 	(3)	 	to nominate General Manager, Deputy General Managers and Chief Accountant of the JV Company;
and
	 
	 	(4)	 	to furnish documents and materials which are necessary for obtaining requisite governmental
permits and approvals for the establishment of the JV Company.





6.2 Responsibilities and Rights of Party B





In addition to its other obligations under this Contract, Party B shall have the following
responsibilities and rights, inter alia:




	 	(1)	 	to make its capital contributions to the registered capital of the JV Company in accordance
with this Contract;
	 
	 	(2)	 	to assist in the application for all relevant approvals for the establishment of the JV
Company, registration with the relevant competent Administration for Industry and Commerce and
procurement of all other necessary approvals, permits and authorizations for the operation of the
JV Company within the scope of its business;
	 
	 	(3)	 	to assist the JV Company in liaising with relevant government departments for the provision of
necessary services; and
	 
	 	(4)	 	to furnish documents and materials which are necessary for obtaining requisite governmental
permits and approvals for the establishment of the JV Company.





ARTICLE 7 REPRESENTATIONS AND WARRANTIES; INDEMNITY




7.1 Representations and Warranties of Party A





Party A hereby represents and warrants to Party B that, as of the date hereof and as of the
Effective Date:




	 	(1)	 	it is a legal entity which is duly incorporated, validly existing and in good standing under
the laws of the place of its establishment or incorporation and it has full power and authority
under those laws to enter into this Contract and to perform all of its obligations hereunder;
	 
	 	(2)	 	the execution and delivery of this Contract by it has been duly authorized and, upon the
Effective Date, this Contract shall be legally binding on it;




Page 9 of 26









 












	 	(3)	 	All information and facts relating to Party A that is in the possession of Party A or is known
to Party A which will have a substantive and adverse effect on Party A’s ability to fulfill any of
its obligations under this Contract or when disclosed to Party B shall have a substantive effect on
the willingness of Party B to sign and fulfill its obligations under this Contract, have been
disclosed to Party B and the information provided by Party A to Party B does not contain any
representation that is untrue or misleading;
	 
	 	(4)	 	neither the execution of this Contract nor the performance of its obligations hereunder will
conflict with, or result in a breach of any provision of its Articles of Association, other
constitutive documents or internal regulations, or any law, regulation, rule, authorization or
approval of any applicable government agency or body, or of any contract or agreement, to which it
is a party or subject or constitute a default thereunder; and
	 
	 	(5)	 	no lawsuit, arbitration, other legal or administrative proceeding or governmental investigation
is in progress nor, to the best of its knowledge, threatened against it which would materially
affect its ability to enter into or perform its obligations under this Contract.





7.2 Representations and Warranties of Party B





	 	(1)	 	Party B is a legal entity that has been duly established according to the laws and regulations
of China and they are validly and legally in existence and also operating normally in accordance
with the laws and regulations of China. Signing this Contract and fulfilling all of its
obligations stipulated herein by Party B shall not contravene or result in the violation of or
constitute a failure to fulfill or an inability to fulfill any of the stipulations in any laws,
regulations, stipulations, any authorization or approval from any government body or department or
the stipulations of any contract or agreement that Party B is a party to or is bound by;
	 
	 	(2)	 	Party B will not take any action after the Signing Date that will cause any adverse impact on
the JV Company or the business of the JV Company;
	 
	 	(3)	 	Party B hereby irrevocably undertakes that in the event that Party B violates any obligation or
responsibility hereunder from the Signing Date of this Contract, upon the written request of Party
A and subject to Approval Authorities’ approval, Party B shall be obligated to transfer all of its
Equity Interest in the JV Company to Party A in accordance with law within thirty (30) days after
the receipt of Party A’s written request at the price evaluated by evaluation agency appointed by
Party A (such price shall not be less than RMB24,500,000). For the purpose of this item (3), Party
B agrees promptly to take all actions and to sign all documents, and to procure its appointees on
the Board of Directors to take promptly all actions and sign all documents, including, without
limitation, to pass Board resolutions approving such transfer and any amendments to this Contract
and the Articles of Association and to procure approvals of the Approval Authorities regarding such
transfer and any amendments to this Contract and the Articles of Association, that are required to
effect such transfer of the Equity Interests to Party A in the JV Company pursuant to PRC laws.
	 
	 	(4)	 	All information and facts relating to Party B that is in the possession of Party B or is known
to Party B which will have a substantive and adverse effect on Party B’s ability to fulfill any of
its obligations under this Contract or when disclosed to Party A shall have a substantive effect on
the willingness of Party A to sign and fulfill its obligations under this Contract, have been
disclosed to Party A and the information provided by Party B to Party A does not contain any
representation that is untrue or misleading;
	 
	 	(5)	 	The execution and delivery of this Contract by Party B has been duly authorized and, upon the
Effective Date, this Contract shall be legally binding on him; and




Page 10 of 26









 












	 	(6)	 	no lawsuit, arbitration, other legal or administrative proceeding or governmental investigation
is in progress nor, to the best of Party B’s knowledge, threatened against him which would
materially affect its ability to enter into or perform its obligations under this Contract.





7.3 Indemnity





Each Party hereby undertakes to indemnify the other Party against any loss, cost, liability and
damage suffered or incurred by that other party as a consequence of any breach of the
responsibilities, representations, warranties or undertakings given or made by it hereunder or the
occurrence of any Event of Default in relation to it.



ARTICLE 8 BOARD OF DIRECTORS




8.1 Formation of the Board of Directors





	 	(1)	 	The Board of Directors shall be the highest authority of the JV Company. The date of issuance
of the Business License shall be deemed to be the date of establishment of the Board of Directors.
	 
	 	(2)	 	The Board of Directors shall comprise five (5) Directors, four (4) of whom shall be appointed
by Party A, one (1) of whom shall be appointed by Party B. The Chairman of the Board of Directors
shall be appointed by Party A who shall serve as the legal representative of the JV
Company.
	 
	 	(3)	 	Each Director shall be appointed for a term of three (3) years, provided that the Party, which
has appointed a Director, may remove that Director and appoint a replacement at any time by board
resolution. A Director may serve consecutive terms if reappointed by the Party that originally
appointed him. If a seat on the Board of Directors is vacated by the retirement, resignation,
removal, disability or death of a Director, the Party that originally appointed such Director shall
appoint a successor to serve out such Director’s term.
	 
	 	(4)	 	Directors shall serve without any remuneration. The reasonable expenses incurred by the
Directors for the performance of their duties as Directors shall be reimbursed by the JV Company
following approval by the Board of Directors. The content mentioned above shall not prohibit the JV
Company pay salaries to Directors who are in the capacity of Senior Management Personnel or
employees of the JV Company.
	 
	 	(5)	 	Any appointment, removal or replacement of a Director appointed by a Party shall be made in
writing and signed by the duly authorized officer of the appointing Party. To appoint or remove a
Director, or to designate or change the Chairman, the relevant Party shall notify the other Party
in writing. The appointment and removal of a Director, and the designation and change of the
Chairman, shall become effective upon receipt of such notice by the JV Company at its registered
address or at the date of appointment, removal or replacement specified in the notice, whichever is
the later. Any such appointment, removal, designation or change shall be approved by the original
examination and approval authority and filed with the relevant Administration for Industry and
Commerce to the extent required by PRC law. Neither Party shall have the right to object to the
appointment of a Director by the other Party.





8.2 Indemnification of Directors





The JV Company shall indemnify each Director against any claim or liability arising from performing
his obligations as a Director, provided that such claim or liability is not a result of any
deliberate misconduct, material negligence, or violation of PRC laws and regulations, the Joint
Venture Contract and this AOA.



Page 11 of 26









 





8.3 Meetings of the Board





	 	(1)	 	The annual and interim meetings of the Board shall not be held unless two thirds or more of all
Directors are present. The first meeting of the Board of Directors shall be held within sixty
(60) days of the date of issuance of the Business License. Thereafter, the Board of Directors shall
hold at least one (1) meeting at the registered address of the JV Company in each calendar year.
Upon the written request of one-third or more of the Directors of the JV Company or any Party to
this Contract specifying the matters to be discussed, the Chairman of the Board shall within thirty
(30) days of receipt thereof convene a meeting of the Board of Directors.
	 
	 	(2)	 	The Chairman of the Board shall give written notice, including the time and place of the
meeting and the agenda, to each of the Directors at least ten (10) days or such other shorter
period as may be mutually agreed by the Directors prior to any meeting of the Board. No decision
shall be taken on any matter at a Board Meeting unless notice of such matter shall have been given
in the manner aforesaid or waiver of such notice has been given in respect of such matter by all of
the members of the Board. The Chairman of the Board shall determine the agenda for Board meetings
and shall be responsible for convening and presiding over such meetings. If the Chairman of the
Board fails to attend a Board meeting, a Director jointly elected by half of all Directors of the
Board shall convene and preside over the meeting.






The meeting of the Board may be held at the registered address of the JV Company or such other
place as the majority of Directors may agree in writing or through audio-visual conference or other
methods of simultaneous communication by electronic, telegraphic or other forms by which all
persons participating in the meeting are able to hear and be heard at all times by all other
participants without the need for a Director to be in the physical presence of the other Directors
provided always that any Director participating in such simultaneous communication declares at the
outset of the meeting that he acknowledges that participation in the simultaneous communication
constitutes his presence in the meeting. The Directors participating in such simultaneous
communication shall be counted in the quorum for such meeting and subject to there being a
requisite quorum at all times during such meeting, all resolutions agreed by the Directors in such
meeting shall be deemed to be as effective as a resolution passed at a meeting in person of the
Directors duly convened and held. In the event that any Director (s) appointed by any Party fails
to attend the Board meeting and do not entrust other person to be his proxy to attend such meeting,
as a result, the Board meeting cannot be held on the set date and make resolution on any material
issue or matter of the company set out in the laws, regulations and this Contract, then the other
Party may resend the notice to the legal addresses of such absent Director and the Party which
appoints such Director, urging him/her to attend the Board meeting. In the event that such Director
still fails to be present at the Board meeting on the prescribed date, then it shall be deemed
waiver of such Director and the Party being notified. After the Party who resends the notice has
received the return receipt of the double registration circular, the Directors appointed by the
Party who resends the notice may hold special meeting of the Board. Even though the quorum of such
special meeting does not reach the legal quorum, subject to unanimous consent of all Directors
present at such special meeting, relevant resolutions regarding material issue or matter of the
company can still be adopted and such resolutions are effective. The minutes of such meeting shall
be circulated to all Directors who attended such a meeting for comments not later than fourteen
(14) days after the conclusion of such meeting, and subject as aforesaid, the minutes of such
meeting after incorporating comments (if any) from the Directors, signed by the Chairman shall be
conclusive evidence of any resolution of any meeting conducted in the manner as aforesaid. A
meeting conducted by the aforesaid means is deemed to be held at the place agreed upon by the
Directors attending the meeting provided that at least one (1) Director participating in the
meeting was at that place for the duration of the meeting.




	 	(3)	 	The Parties shall urge their respective nominees to the Board of Directors to attend all
meetings either in person or by proxy. The quorum for all meetings of the Board of Directors shall
be implemented in accordance with relevant provisions of the Company Law. No resolution shall




Page 12 of 26









 






	 	 	 	be adopted at any meeting of the Directors unless a quorum is present and the proposed transaction
is approved by majority of votes by the Directors present at the meeting.






	 	(4)	 	A Director may at any time appoint any person to be his alternate and to remove or replace such
alternate Director. All appointments, removals and replacements of alternate Directors made by any
Director shall be in writing under the hand of the Director making the same and shall take effect
from the date of its receipt at the registered office of the JV Company or on the date of
appointment, removal or replacement specified in the notice, whichever is the later. An alternate
Director may not represent more than one Director and an alternate Director shall be entitled at
Board meetings to one (1) vote for the Director he represents.
	 
	 	(5)	 	The Board of Directors shall keep complete and accurate minutes (in English and Chinese) of all
Board meetings which shall be signed by the Directors present. The draft minutes of each
Board meeting shall be distributed after the relevant meeting to all Directors present at such
meeting. Any suggested revision or supplement of the draft minutes shall be delivered in writing
to the Chairman of the Board of Directors. The Chairman of the Board shall finalize the minutes
and distribute a copy to each Director and each Party. If the Chairman cannot reach consensus in
respect of any part of the minutes, he shall finalize the rest of the minutes and distribute them
in accordance with this paragraph and the relevant part which has not been agreed shall be the
first item on the agenda at the Board’s next meeting. The JV Company shall keep the minutes of the
Board meetings which shall be available upon request of any Party or its authorized
representatives.





8.4 Powers of the Board





The Parties hereby irrevocably agree that as the Directors are nominees of the respective Parties,
the Directors shall be entitled to report all matters concerning the JV Company, including but not
limited to, matters discussed at any Board meeting, to the respective Party, and that the Directors
may take advice and obtain instructions from the respective Parties. In addition, the Parties
acknowledge that where any Director is appointed by any Party under a right conferred by this
Contract and any PRC laws and/or regulations, that Director, in performing any of his duties or
exercising any power, right or discretion as a Director, shall be entitled to have regard to and
represent the interests of the respective appointing Party, and to act on the wishes of such
appointing Party except in any particular case where no honest and reasonable director may hold the
view that in so doing the Director was acting bona fide in the best interests of the JV Company.




Subject to the following, the Board of Directors shall have the power to determine all major
decisions pertaining to the JV Company.




	 	(1)	 	The unanimous approval of all the Directors present in person or by his alternate at a duly
convened meeting of the Board of Directors shall be required for each of the following matters:






	 	1)	 	any increase or decrease of the JV Company’s registered capital;
	 
	 	2)	 	any amendment to the
Articles of Association;
	 
	 	3)	 	the termination or dissolution of the JV Company; and
	 
	 	4)	 	the merger or
spin-off of the JV Company.




Party B hereby irrevocably undertakes and warrants that, as for any increase or decrease of the JV
Company’s registered capital and/or any amendment to the Articles of Association of the JV Company,
Party B shall unconditionally follow the instructions from Party A and act in accordance with such
instructions to sign on relevant Board resolutions and take all other measures deemed reasonable
and necessary by Party A. In the event that Party B violates such undertaking and warranty, Party A
and Party B shall amend this Contract and the Articles of Association of the JV Company
immediately.




Page 13 of 26









 









	 	(2)	 	The following matters shall require the approval of two thirds majority of the Directors of the
Parties present in person or by his alternate at a duly convened meeting of the Board of Directors:






	 	1)	 	the adoption of the General Manager’s management and business report;
	 
	 	2)	 	 any investment by the
JV Company in any other company or enterprise; 
	 
	 	3)	 	establishment of branches or other offices;
	 
	 	4)	 	the amount allocated to the Three Funds and any expenditure of such Funds for each financial
year;
	 
	 	5)	 	the approval of the annual financial budget plan and final accounts plan of the JV Company;
	 
	 	6)	 	the creation of any mortgage, charge or other encumbrance over the JV Company’s property for the
benefit of the JV Company exceeding RMB1,000,000 (inclusive), or any mortgage is not related to the
core business of the JV Company;
	 
	 	7)	 	the sale or purchase by the JV Company of any fixed assets or immovable property with a value in
excess of RMB1,000,000 (inclusive);
	 
	 	8)	 	any amendment, termination or assignment of any material agreement with a value in excess of
RMB5,000,000 (inclusive);
	 
	 	9)	 	the adoption of the Tax Statement and the audited Financial Statement;
	 
	 	10)	 	entry by the JV Company into any commercial agreement or contract with a value in excess of
RMB5,000,000 (inclusive);
	 
	 	11)	 	any loan or borrowing by the JV Company in excess of RMB1,000,000 (inclusive);
	 
	 	12)	 	the incurrence of any debt or liability, direct or contingent, whether pursuant to any
guarantee, endorsement, agreement to provide or advance funds, or otherwise, by the JV
Company;
	 
	 	13)	 	the adoption of the JV Company’s internal policies and major rules and regulations;
	 
	 	14)	 	adoption of, or any significant change in, the accounting policies of the JV Company;
	 
	 	15)	 	the appointment, removal, remuneration and welfare benefits of the Senior Management Personnel;
	 
	 	16)	 	the opening of any bank accounts and designation of signing authorities (namely, Chief
Accountant);
	 
	 	17)	 	the commencement of litigation or arbitration proceedings, and settlement of any legal claims
against the JV Company, including, without limitation, any proceedings seeking to adjudicate the JV
Company insolvent; and
	 
	 	18)	 	any other matters referred to the Board for discussion except matters provided in item (1) of
this Article.





8.5 Written Resolutions





Page 14 of 26









 









Unless otherwise provided in this Contract, the Board of Directors may adopt any resolution without
a meeting of the Board if the number of the Directors is in compliance with the legal requirement.
Such written resolutions shall be filed with the minutes of Board of Directors’ meetings and shall
have the same force and effect as a resolution adopted at a meeting of the Board of Directors duly
convened and held.



ARTICLE 9 MANAGEMENT ORGANIZATION




9.1 Management Organization





	 	(1)	 	The JV Company shall have one (1) General Manager. The JV Company’s management organization
shall be under the leadership of the General Manager, who shall report directly to the Board of
Directors.
	 
	 	(2)	 	The JV Company shall have several Deputy General Managers, who shall assist General Manager.
	 
	 	(3)	 	The JV Company shall have a Chief Accountant, who shall be responsible for the financial
management of the JV Company.
	 
	 	(4)	 	Subject to the approval of the Board of Directors, the JV Company may also set up several
internal departments with department managers and vice department managers being responsible for
the departments’ work thereof respectively.





9.2 Appointment and Replacement of Senior Management Personnel





	 	(1)	 	The General Manager, Deputy General Managers and Chief Accountant shall be nominated by Party A
and appointed by the Board of Directors. The aforesaid appointment shall not be delayed
unreasonably. Replacements of the Senior Management Personnel, whether by reason of the retirement,
resignation, disability or death of any Senior Management Personnel or of the removal of any Senior
Management Personnel by the Board of Directors, shall be nominated and appointed in the same manner
as the original appointee.
	 
	 	(2)	 	Remuneration, responsibility and powers of the Senior Management Personnel shall be stated in
the JV Company’s individual engagement contracts.





9.3 Scope of Senior Management Authority and Performance of Duties





	 	(1)	 	The General Manager shall be in charge of the day-to-day operation and management of the JV
Company and shall carry out all matters entrusted to him by the Board of Directors. The Deputy
General Managers shall assist the General Manager in his/her work. The important issues shall be
decided jointly by the General Manager and the Deputy General Managers.
	 
	 	(2)	 	Chief Accountant and other Senior Management Personnel shall exercise the rights and fulfill
the obligations in accordance with relevant PRC laws and regulations, this Contract, the Articles
of Association and authorization by the Board of Directors.
	 
	 	(3)	 	The General Manager shall perform their duties on a full-time basis and shall not concurrently
serve as a general manager or deputy general manager of any other company or enterprise, nor shall
they participate in any commercial competition by any other company or enterprise against the JV
Company.




Page 15 of 26









 












	 	(4)	 	Subject to applicable PRC laws and regulations, the Board of Directors may remove at any time
without notice, the General Manager, Deputy General Managers or Chief Accountant if any of them
breaches paragraph (2) and /or (3) above or is otherwise in material breach of his/her duties.
	 
	 	(5)	 	The General Manager shall have the following powers and take corresponding responsibilities
(without limitation to the generality of the other provisions in this Article 9.3):






	 	1)	 	to preside over the JV Company’s production, operation and management and to implement any
applicable resolutions of the Board;
	 
	 	2)	 	to implement the JV Company’s annual Business Plan for the Board’s approval;
	 
	 	3)	 	to propose a plan for the internal management for the JV Company for the Board’s approval;
	 
	 	4)	 	to propose the basic bylaws for the management of the JV Company for the Board’s approval;
	 
	 	5)	 	to appoint or dismiss senior employees other than the Senior Management Personnel; and
	 
	 	6)	 	any other powers delegated to him/her by relevant PRC laws and regulations, the Articles of
Association or by the Board of Directors.





9.4 Management Structure





The JV Company’s basic management structure shall be determined by the Board of Directors. The
details of the JV Company’s organizational structure and the establishment of employment positions
other than Senior Management Personnel’s positions shall be determined by the General Manager.



ARTICLE 10 SUPERVISOR




10.1 Supervisor





The JV Company shall have one (1) supervisor, who shall be appointed by Party A. The supervisor
shall have the rights and obligations as provided by the Company Law.



10.2 Term of Office





The term of office of the Supervisor shall be three (3) years. The Supervisor may continue to serve
its post.



10.3 Qualifications





The Supervisor shall conform to the qualification requirements as provided by the Company Law.
Directors and Senior Management Personnel shall not concurrently serve as the Supervisor.



10.4 Powers of the Supervisor





The Supervisor shall have the following powers:




	 	(1)	 	to inspect the financial affairs of the JV Company;




Page 16 of 26









 












	 	(2)	 	to monitor the duty-related acts of the Directors, the General Manager and other Senior
Management Personnel in the performance of their duties;
	 
	 	(3)	 	to request Directors, the General Manager or other Senior Management Personnel to rectify any
of their acts which are deemed to be harmful to the interests of the JV Company;
	 
	 	(4)	 	to initiate actions, in accordance with relevant provisions of the Company Law, against
Directors and Senior Management Personnel; and
	 
	 	(5)	 	to carry out any other powers provided by the Company Law and Articles of Association.





ARTICLE 11 LABOUR MANAGEMENT




11.1 Governing Principle





Matters relating to the recruitment, employment, dismissal, resignation, wages and welfare of the
staff of the JV Company shall be dealt with in accordance with the Labour Law of the PRC, the
Labour Contract Law of the PRC, the Trade Union Law of the PRC and related Chinese laws and
regulations (hereinafter collectively referred to as the “Labour Laws”). The JV Company’s labour
rules and policies shall be approved by the Board of Directors, and the implementation thereof
shall be handled by the General Manager or under the General Manager’s supervision.



11.2 Employment Examination and Recruitment





	 	(1)	 	The JV Company’s working personnel, other than Senior Management Personnel shall be employed by
the JV Company in accordance with the terms of an individual employment contract approved by the
General Manager. The Senior Management Personnel shall be employed by the JV Company in accordance
with the terms of individual engagement contracts approved by the Board of Directors.
	 
	 	(2)	 	The JV Company shall maintain strict control over the number and quality of its employees. The
General Manager shall have the right to dismiss any unsuitable or unqualified employees in
accordance with the Labour Laws.





11.3 Conformity with Labour Protection





The JV Company shall conform to rules and regulations of the Chinese government concerning labour
protection and ensure safe and civilized operations. Labour insurance for employees of the JV
Company shall be handled in accordance with the Labour Laws.



11.4 Trade Union





The JV Company’s employees shall have the right to establish a trade union in accordance with the
Trade Union Law of the PRC. Based on the Equity Joint Venture Law, the JV Company shall allot each
month two percent (2%) of the total amount of the aggregate wages payable by the JV Company to its
employees for payment into a trade union fund. The trade union shall use these funds in accordance
with the relevant control measures for trade union funds formulated by the All China Federation of
Trade Unions.



ARTICLE 12 FINANCIAL AFFAIRS AND ACCOUNTING




Page 17 of 26









 








12.1 Accounting System





	 	(1)	 	The Chief Accountant of the JV Company shall be responsible for the financial management of the
JV Company. No expenditure in excess of the amount of RMB50,000 (inclusive) will be permitted out
of the JV Company’s accounts without obtaining written authorization jointly from the Chief
Accountant and the General Manager.
	 
	 	(2)	 	The Chief Accountant shall prepare the JV Company’s accounts in accordance with the Enterprise
Accounting System and other relevant Chinese laws and regulations, and submit such to the Board of
Directors for adoption. The accounts shall be filed with the relevant government department in
charge of the JV Company and with the relevant local department of finance and shall also be
delivered to the relevant tax authorities for their records.
	 
	 	(3)	 	The JV Company shall adopt Renminbi as its bookkeeping base currency, but may also adopt United
States Dollars, Hong Kong Dollars, Singapore Dollars or other foreign currencies as supplementary
bookkeeping currencies.
	 
	 	(4)	 	All accounting records, vouchers, books and statements of the JV Company must be made and kept
in Chinese with the exception of the separate accounts to be prepared in accordance with the
International Accounting Standards which may be kept in English. All financial statements and
reports of the JV Company shall be made and kept in both Chinese and English.
	 
	 	(5)	 	The exchange rate between any applicable foreign currency and Renminbi for the purposes of any
financial statements and reports shall be the basic published rate for conversion of such currency
as reported by the People’s Bank of China on the date of actual receipt or payment by the JV
Company.





12.2 Financial Year





The financial year of the JV Company shall be from 1st January to 31st
December of each calendar year. The JV Company’s first financial year shall commence on the date of
receipt of the Business License and shall end on the immediately succeeding December 31.



12.3 Auditors





	 	(1)	 	The Parties shall have full and equal access to the JV Company’s accounts, which shall be kept
at the registered address of the JV Company. The JV Company shall furnish to each Party unaudited
financial reports on a monthly and quarterly basis.
	 
	 	(2)	 	The JV Company shall engage an accounting firm to audit its accounts and prepare its annual
financial statements and report. Drafts of the audited financial statements and report shall be
provided to each Party and to the Board of Directors for review within two (2) months of the end of
each financial year, and the final audited financial statements and report shall be completed not
later than three (3) months after the end of each financial year.





12.4 Bank Accounts and Foreign Exchange Control





The JV Company shall open foreign exchange accounts and RMB account at onshore banks which has been
approved to operate foreign exchange business. The JV Company’s foreign exchange transactions shall
be handled in accordance with the laws and regulations of China relating to foreign exchange
control.



ARTICLE 13 DISTRIBUTION OF PROFITS




Page 18 of 26









 








13.1 Distribution of Profits





	 	(1)	 	Profits shall be distributed between the Parties in accordance with the percentage of Equity
Interests held by them in the registered capital of the JV Company. The JV Company shall not
distribute any net profits of the current year unless the losses and deficits of previous years
have been made up. Retained profits from previous years may be distributed together with those of
the current year.
	 
	 	(2)	 	After the JV Company has paid any applicable taxes and made up any losses incurred in previous
years, the Board of Directors shall decide the allocations of the after-tax profits to the Three
Funds in accordance with applicable PRC laws.
	 
	 	(3)	 	The Board of Directors shall determine the amount of any after-tax profits required to be
retained by the JV Company to meet its normal fixed and working capital and loan repayment
requirements (if any) not later than three (3) months after the end of each financial year.
	 
	 	(4)	 	Dividends shall be declared in RMB. If the JV Company has foreign exchange, dividends payable
to Party A shall, to the extent permitted by applicable laws and regulations in the PRC, be
preferentially paid in US dollars, and the dividends payable declared in RMB shall be converted
into US Dollars at the middle rate issued by the People’s Bank of China on the date due to pay
dividends. Dividends payable to Party B shall be paid in RMB. In the event that the JV Company does
not have enough foreign exchange to pay all dividends, the JV Company shall convert the rest of RMB
into US Dollars at the selling rate issued by People’s Bank of China at that time. The dividends
and other payments paid by the JV Company to Party A by remittance shall be, to the extent
permitted by applicable laws and regulations in the PRC, remitted in US Dollars into the offshore
banks designated by Party A.





ARTICLE 14 TAXATION AND INSURANCE




14.1 Income Tax and Other Tax





The JV Company shall pay enterprise income tax and other taxes and fees in accordance with relevant
laws and regulations of the PRC. The JV Company’s employees shall pay individual income tax in
accordance with the Individual Income Tax Law of the PRC.



14.2 Insurance





The JV Company shall at all times maintain insurance coverage of the types and in the amounts
determined by the General Manager and approved by the Board of Directors in accordance with
relevant PRC laws and regulations. The JV Company shall obtain insurance from insurance companies
or organizations inside the PRC, subject to any applicable PRC laws and regulations.



ARTICLE 15 CONFIDENTIALITY AND NON-COMPETITION




15.1 Confidentiality





	 	(1)	 	Each Party acknowledges that it may have disclosed or may disclose to the other Party
confidential and proprietary information concerning its business, financial condition, proprietary
technology, research and development and other confidential matters in connection with entry into
this Contract. Furthermore, each of the Parties acknowledges that it may obtain such confidential
and proprietary information concerning the JV Company and the JV Company may also obtain such
confidential and proprietary information about each of the




Page 19 of 26









 






	 	 	 	Parties. Except to the extent otherwise agreed, each Party and the JV Company which receives any
such information as aforesaid (hereinafter referred to as “Confidential Information”) shall, and
shall cause the JV Company to at all times during the continuation of this Contract:






	 	1)	 	maintain the confidentiality of such Confidential Information; and
	 
	 	2)	 	not disclose it to any person or entity, except to their respective employees who need to know
such Confidential Information to perform their work responsibilities.






	 	(2)	 	The provisions of paragraph (1) above shall not apply to Confidential Information that:






	 	1)	 	is or becomes public knowledge otherwise than through the receiving party’s breach of this
Contract;
	 
	 	2)	 	was obtained by the receiving party from a Third Party having no obligation of confidentiality
with respect to such Confidential Information; or
	 
	 	3)	 	is required to be disclosed by order of any competent court or governmental authority or other
regulatory authorities having jurisdiction over the JV Company or the relevant Party.






	 	(3)	 	Each Party shall advise its Directors, senior staff, and other employees receiving such
Confidential Information of the existence of and the importance of complying with the obligations
set forth in paragraph (1) above.
	 
	 	(4)	 	Both Parties shall cause the JV Company to formulate rules and regulations to cause its
Directors, Senior Management Personnel, other employees and professional advisors to comply with
the confidentiality obligations set forth in this Article 15. All Directors, Senior Management
Personnel, and other employees of the JV Company for whom the Board of Directors considers it
necessary for them to sign a confidentiality undertaking shall sign a confidentiality undertaking.
	 
	 	(5)	 	If any Party or the JV Company breaches the provisions of this Article 15, it shall indemnify
the other Party and/or the JV Company against any cost, loss or damage incurred by the other Party
or the JV Company as a result of such breach. This indemnity shall be without prejudice to any
other rights or remedies accrued at the date of such breach.





ARTICLE 16 DURATION OF THE JV COMPANY




16.1 Duration of the JV Company





The duration of the JV Company shall be a period of thirty (30) years from the date the Business
License of the JV Company is issued, unless this Contract is terminated in accordance with Article
17.3 or extended in accordance with Article 16.2.



16.2 Extension of the Duration





Agreed by both Parties and approved by the Board, the JV Company can file an application to extend
the duration with the Approval Authorities at least six (6) months before the expiration date and
go through necessary registration procedures.



Page 20 of 26









 





ARTICLE 17 MERGER, DIVISION, BANKRUPTCY, TERMINATION AND LIQUIDATION




17.1 Merger or Division





The merger or division of the JV Company shall require the approval of the Board of Directors and
the approval of the Approval Authorities.



17.2 Bankruptcy or Insolvency





If the JV Company is declared bankrupt or insolvent by a people’s court in accordance with the laws
of PRC, the liquidation of the JV Company shall be conducted in accordance with applicable laws of
PRC.



17.3 Termination and Dissolution





	 	(1)	 	This Contract shall be terminated under any of the following circumstances:






	 	1)	 	the duration of the JV Company expires;
	 
	 	2)	 	the JV Company suffers losses and the Board of Directors unanimously resolves that the JV
Company be liquidated on the basis that in its opinion the JV Company is likely to continue to
suffer financial losses from which it is unlikely to recover;
	 
	 	3)	 	a Party is unable to perform its contractual obligations under this Contract due to an event of
Force Majeure (as defined below), and such event continues for a period exceeding six (6) months
after written notice of the occurrence of such event is given by the affected Party to the other
Party;
	 
	 	4)	 	if any Party materially breaches any provision or term of this Contract and fails to remedy such
breach within one hundred and eighty (180) days from receipt of written notice of such breach and
the non-breaching Party may give written notice to the breaching Party to terminate this Contract
and dissolve the JV Company;
	 
	 	5)	 	The Parties unanimously agree that the JV Company does not reach its business objectives and
has no prospects for development; or
	 
	 	6)	 	any other circumstances provided by the Equity Joint Venture Law.






	 	(2)	 	If any of the circumstances set out in Article 17.3(1) has occurred, each of the Parties shall
consent to and file an application with the Approval Authorities for termination of this Contract
and the JV Company. Each Party agrees to take all actions and to sign all documents, and to
procure its appointed Directors on the Board of Directors to take all actions and to sign all
documents, which are legally required to effect termination of this Contract.





17.4 Liquidation





	 	(1)	 	If this Contract is terminated under Article 17.3(1), the JV Company shall establish a
Liquidation Committee according to the Company Law and other relevant laws and regulations. The
Liquidation Committee shall be composed of at least three (3) members, who will be selected from
the Board of Directors (including the director appointed by Party B) or engaged by the Board of
Directors from the relevant professional allowed by the PRC laws.
	 
	 	(2)	 	The Liquidation Committee will value and liquidate the JV Company’s assets in accordance with
relevant laws and regulations, provided that any creditors’ rights are secured.




Page 21 of 26









 












	 	(3)	 	The Liquidation Committee will conduct a thorough examination of the JV Company’s fair market
value on a going concern basis and its assets and liabilities. On the basis of such examination,
the Liquidation Committee will develop a liquidation plan for the liquidation of the JV Company.
	 
	 	(4)	 	All actions, including, without limitation, the disposition of any material assets of the JV
Company, of the Liquidation Committee shall require the unanimous consent in writing from all the
members of the Liquidation Committee. No member of the Liquidation Committee will have the power
to take any action binding the JV Company without the express authorization in writing of all
members of the Liquidation Committee.
	 
	 	(5)	 	Upon completion of all liquidation procedures, the Liquidation Committee shall submit its final
report, after unanimous approval by the Board of Directors, to the Approval Authorities for record.
Thereafter, the Business License of the JV Company shall be cancelled and the JV
Company shall be dissolved.
	 
	 	(6)	 	If during the course of the liquidation, the Liquidation Committee concludes that the assets of
the JV Company are not sufficient to pay off its debts, the Liquidation Committee shall apply to
the local court to declare the JV Company bankrupt or insolvent and commence bankruptcy or
insolvency proceedings.
	 
	 	(7)	 	The total assets of the JV Company shall be applied in the following order upon the completion
of the liquidation of all the assets of the JV Company:






	 	1)	 	all costs of the liquidation;
	 
	 	2)	 	wages and labour insurance premiums of the staff and personnel of the JV Company;

	 
	 	3)	 	  due taxes;
	 
	 	4) 	 	the JV Company’s other debts;
	 
	 	5)	 	  due expenses of management and operation; and
	 
	 	6)	 	distribution to the Parties in accordance with their respective capital contributions in the JV
Company.





ARTICLE 18 EVENT OF DEFAULT




18.1 Event of Default





Each of the following shall constitute an Event of Default under this Contract:




	 	(1)	 	a Party fails to perform any of its contractual obligations under or in connection with this
Contract and such Party fails to remedy its default within thirty (30) days (if thirty (30) days is
obviously not enough for such Party to remedy its default or recover to perform the duty under this
Contract, such period shall be extended to no more than sixty (60) days) of the date of receipt of
notice requiring such remedy from the non-defaulting Party;
	 
	 	(2)	 	any representation or warranty made by any of the Parties is incorrect in any material respect
when made; or
	 
	 	(3)	 	The liquidation or winding-up, or the appointment of an administrator or receiver, etc. of any
of the Parties shall be completed within thirty (30) days.




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18.2 Consequences of an Event of Default





If an Event of Default has occurred and is continuing, the non-defaulting Party shall have the
option to (a)claim against the breaching Party or (b) if the default continues unremedied for one
hundred and eighty (180) days require the Board of Directors to resolve to dissolve the JV Company.




The breaching Party’s liability of remedy shall not be released upon the termination of this
Contract.



ARTICLE 19 FORCE MAJEURE




19.1 Force Majeure





Force Majeure shall mean any act or event that prevents an affected Party from performing its
obligations in accordance with the terms of this Contract, if such act or event is beyond the
reasonable control of and not the result of the fault or negligence of the affected Party and such
Party has been unable to overcome such act or event by taking any reasonable action, including,
without limitation, natural phenomena, such as storms, hurricanes, floods, drought, lightning and
earthquakes, fires, wars, civil disturbances, riots, insurrections and sabotage and actions by a
governmental authority that are not voluntarily induced or promoted by a party, including any
change in applicable law.




Upon and during any act or event of Force Majeure, the Parties shall use their best efforts to
mitigate any losses, damages or costs arising directly or indirectly from such Force Majeure.



ARTICLE 20 SETTLEMENT OF DISPUTES




20.1 Arbitration





	 	(1)	 	In the event of any dispute, controversy, or claim (collectively, a “Dispute”) arising out of
or relating to this Contract, or the breach, termination or invalidity thereof, the Parties shall
attempt in the first instance to resolve such Dispute through friendly consultations. If no
mutually acceptable settlement of a Dispute is made within a sixty (60) day period of the Parties
becoming aware of the Dispute, the Dispute shall be submitted for, and be decided finally by,
arbitration.
	 
	 	(2)	 	Any arbitration of a Dispute arising out of or in connection with this Contract shall be
conducted at China International Economic and Trade Arbitration Commission in Beijing in accordance
with its arbitration rules. The place of arbitration shall be in Beijing. All proceedings in such
arbitration shall be conducted in Chinese. The arbitration shall be conducted in accordance with
arbitration rules of China International Economic and Trade Arbitration Commission.





20.2 Effect of Arbitration Award





The arbitration award shall be final and binding on the Parties, and the Parties agree to be bound
thereby and to act accordingly.



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20.3 Costs





The costs of arbitration shall be borne by the losing Party unless otherwise determined by the
arbitration award.



20.4 Continuing Rights and Obligation





When any Dispute occurs and is under arbitration, except for the matters under dispute, the Parties
shall continue to exercise their remaining respective rights, and fulfill their remaining
respective obligations, under this Contract.



ARTICLE 21 APPLICABLE LAW




21.1 Applicable Law





The formation, validity, interpretation and performance of this Contract, and any Disputes arising
under this Contract, shall be governed by the laws of the PRC. If no such laws of the PRC apply,
the common international business rules shall be applied to the relevant matter.



ARTICLE 22 MISCELLANEOUS PROVISIONS




22.1 Waiver





Unless the PRC laws otherwise stipulate or this Contract otherwise provides, failure or delay on
the part of any Party hereto to exercise a right under this Contract shall not operate as a waiver
thereof, nor shall any single or partial exercise of a right preclude any other future exercise
thereof. The rights and remedies provided by this Contract are cumulative and are not exclusive of
any rights or remedies provided by law.



22.2 Assignment





Except as otherwise provided herein, neither this Contract nor any rights and obligations hereunder
may be assigned in whole or in part by any Party without the prior written consent of the other
Party and, where required by law, the approval of the Approval Authorities.



22.3 Amendment





This Contract is made for the benefit of the Parties and their respective lawful successors and
assignees and is legally binding on them. This Contract may not be amended orally, and any
amendment hereto must be agreed to in a written instrument signed by each of the Parties and, where
required by law, approved by the Approval Authorities before taking effect.



22.4 Severability





The invalidity of any provision of this Contract shall not affect the validity of any other
provision of this Contract.



     22.5 Language



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This Contract is signed in the Chinese language in five (5) originals, and in the English language
in five (5) originals. In case of any discrepancy, the Chinese language shall prevail.



22.6 Notices





Any notice or written communication provided for in this Contract from one Party to any other Party
shall be made in writing in Chinese and sent by courier service delivered letter or by facsimile
with a confirmation copy sent by courier service delivered letter. The date of receipt of a notice
or communication hereunder shall be deemed to be seven (7) days after the letter is given to an
air-courier service or one (1) day after sending in the case of a facsimile, provided it is
evidenced by a confirmation receipt and the confirmation copy is sent. All notices and
communications shall be sent to the appropriate address set forth below, until the same is changed
by notice given in writing to each other Party.




Party A: China Hydroelectric Corporation



	 	 	 
	Mailing Address:

	 	Area B, 25th Floor, New Poly Plaza, No.1, North Road of
Chaoyangmen, Dongcheng District, Beijing, China
	 
	 	 
	Addressee:

	 	Li Weiwei
	 
	 	 
	Telephone:

	 	8610-64928483
	 
	 	 
	Facsimile:

	 	8610-64961540







Party B: Sanming City Chenyang Hydroelectric Co., Ltd.



	 	 	 	 	 
	Mailing Address:

	 	Room 505, Building 7, University Residential Zone,
No.12, Xi Jiang Bin Avenue, Gulou District,
Fuzhou City

	 
	 	 	 	 
	Addressee:

	 	Huang Shao Ping

	 
	 	 	 	 
	Telephone:

	 	13959339966	 	 
	 
	 	 	 	 
	Facsimile:

	 	0591-83757357	 	 






22.7 Effectiveness





This Contract shall become effective upon approval by the Approval Authorities.



22.8 Entire Agreement





This Contract shall constitute the entire agreement between the Parties relating to the subject
matter of this Contract and supersede all prior correspondence, agreements and documents between
the Parties hereto in connection with the subject matter of this Contract.



(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)




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IN WITNESS WHEREOF, the duly authorized representatives of Party A and Party B have signed this
Contract in Fuzhou City, PRC on the date first set forth above.




Party A: China Hydroelectric Corporation




Signature:                                         




Position:



Party B: Sanming City Chenyang Hydroelectric Co., Ltd.




     (seal)



Signature:                                         




Position:                                         





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