Document:

Unassociated Document

     

     

     

     

     

     

    
 

    Letter
      of
      Intent
      for Cooperation

     

     

     

     

    
 

    Yantai
      Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group

    AND

    General
      Steel Holdings Inc.

     

     

    
 

    August
      2008

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.
      General.

    

    1.1
      This
      letter of intent for cooperation is made between Yantai Steel Pipe Co., Ltd.
      of
      Laiwu Iron&Steel Group and General Steel Holdings Inc. by friendly
      negotiation on a basis of equity and common interest in accordance with the
      Regulations for the Implementation of the Law of the People’s Republic of China
      on Chinese-Foreign Equity Joint Ventures. 

    

    1.2
      As a
      shareholder of Yantai Steel Pipe Co., Ltd., Laiwu Iron&Steel Group has given
      verbal approval for Yantai Steel Pipe Co., Ltd. looking for strategic investor.
      And General Steel Holdings Inc. has fully expressed its willingness to hold
      the
      stock in Yantai Steel Pipe Co., Ltd. in various forms. 

    

    2.
      Cooperation Parties. 

    

    2.1
      The
      parties involved in the cooperation are presented as follows: 

    Party
      A:
      Yantai Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group (Chinese). It
      participates in the negotiation representing its two shareholders: the Trade
      Union Committee of Yantai Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group and
      Yantai Hengchang Investment Co., Ltd.. 

    President:
      Xu Wei

    Nationality:
      China 

    Note:
      Yantai Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group was established and
      located in Yantai city, Shandong province, China. 

    Party
      B:
      General Steel Holdings Inc., 

    President:
      Yu Zuosheng

    Nationality:
      China

    Note:
      General Steel Holdings Inc., a public company in the U.S., was established
      in
      the U.S.. 

    

    2.2
      Pursuant to the requirements hereof, Party A and Party B will be respectively
      called “Party A, or Party B”, or collectively called “Parties”. 

    

    2.3
      Parties hereto shall announce and guarantee to each other that each party is
      legitimate to join this letter of intent, shall exercise the obligations
      hereunder, and the representatives mentioned above shall have been fully
      authorized to be on behalf of the investors to sign this letter of intent and
      other relevant documents. 

    

    3.
      Establishment of a Chinese-foreign joint venture. 

    

    3.1
      Parties hereof agree that Party B purchases the stock held by Party A in Yantai
      Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group, which, since then, will turn
      to be a Chinese-foreign joint venture (hereinafter referred to as “Joint
      Venture”) from an entire domestic business. 

    

    3.2
      The
      investing parties of Joint Venture will be Yantai Steel Pipe Co., Ltd. of Laiwu
      Iron&Steel Group and General Steel Holdings Inc.. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

      3.3
        The
        legal registered location of the Joint Venture is Zhifutun Road No. 92, Zhifu
        District of Yantai city, Shandong province, China. 

      3.4
        All
        the actions taken by the Joint Venture shall be in line with, and governed
        and
        protected by, laws, acts and regulations of the People’s Republic of China.

      

      3.5
        The
        organization form of the Joint Venture shall be a limited liability company.
        The
        registered amount of capital contributed by each Party shall comply with
        Article
        5 hereof, and any operation of additional capital shall be in line with the
        relevant regulations of China. 

      

      The
        profit of the Joint Venture will be allocated according to the proportions
        of
        Parties’ registered capital
        contribution. And Laiwu Iron&Steel Group will have 20% of the rights and
        interests, and profits of the Joint Venture, and General Steel Holdings Inc.
        80%
        of them. The liabilities each Party shall hold in the Joint Venture is only
        limited within the size of their registered capital shares in the Joint Venture.
        

      4.
        Purposes, scope and scale of the cooperation. 

      

      4.1
        Business objectives of the Joint Venture. 

      The
        Parties entering this letter of intent are on the common ground to enhance
        their
        cooperation on capital use and advanced technologies, explore the global
        market,
        upgrade products, improve economic efficiency, and realize double win.

      

      4.2
        Business scope of the Joint Venture. 

      Co-operating
        the existing businesses of Yantai Steel Pipe Co., Ltd. after Party B purchasing
        the stock held by the Trade Union Committee of Yantai Steel Pipe Co., Ltd.
        of
        Laiwu Iron&Steel Group and Yantai Hengchang Investment Co., Ltd.; improving
        production capability, upgrading products and exploring markets domestically
        and
        internationally by increasing capital and expanding stock pool in constructing
        new production lines for seamless pipe; exporting oil-pipe products.

      

      4.3
        Current tasks of Parties. 

      ■
        Party A:

      --Communicate
        the idea of cooperating with Party B with the management and employees holding
        shares, and win over the majority, in order to push the cooperation into
        a
        success ASAP; 

      --Report
        it to Laiwu Iron&Steel Group in a formal manner and obtain written approval;

      --Sort
        out and document the current fixed assets; 

      --Know
        about the policies on business combination from the local government;

      --Prepare
        investment plan for new projects. 

      

      ■ Party
        B:

      --Report
        the matter to the Board of directors for a quick approval; 

      --Make
        preparation for audit; 

      --Carry
        out preparatory work on the feasibility report for new projects, and market
        research shall be highlighted; 

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      --Raise
        adequate
        money for purchasing equity and for sequent new projects. 

      

      4.4
        Production and operational capacities as follows: 

      --
        The
        existing producing systems of Yantai Steel Pipe will be preserved by the
        Joint
        Venture; 

      --A
        new
        production line for hot rolling seamless pipe will be invested and built
        up.

      --The
        final production capacity of the Joint Venture has been preliminarily designed
        to be 500,000~600,000 tons, with enough preserved spaces for development
        of
        potential second stage pipe processing units. (Note: it shall take into account
        the prospect of Baogang’s planned production capacity of 2 million tons, also
        the balance of products and specifications and the requirements of target
        markets.)

      --Main
        products will cover selective products including oil pipe (tube), boiler
        pipe
        (tube), hydraulic pipe (tube) and those used in mechanical structure.

       

      
        5.
          Registered capital and ownership interest. 

        

        5.1
          The
          total investment for the Joint Venture will not be included until the completion
          of the matters as follows: (a) Parties have finished the relevant negotiations;
          (b) Parties have discussed the feasibility reports on the new projects;
          (c) the
          details concerning investment size and timetable have been decided; (d)
          the
          actual budget for the new projects has been recognized. 

        

        5.2
          The
          cooperation between Party A and Party B will be realized by the solutions
          that
          Party B purchases the stock held by the employees and management and signs
          the
          relevant agreements with them respectively, and the shares held by
          Laiwu
          Iron&Steel Group will be preserved. 

         

        5.3
          Basis and principles for pricing equity in aquisition

        
          Party
            A
            holds registered capital totaling?83,868,200 Yuan, of which the Trade
            Union
            Committee of Yantai Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group
            has?38,160,000Yuan, accounting for 45.5% of the total, Yantai Hengchang
            Investment Co., Ltd.?28,934,500Yuan, accounting for 34,5%, and Laiwu
            Iron&Steel Group?16,773,700Yuan, accounting for 20%. Party A shall provide
            Party B its financial statement ended by June 30th, 2008, which shows
            the assets
            value?1,105,920,000Yuan, liability?913,960,000Yuan, and wonership
            interests?191,960,000Yuan. 

           

        

      

    

    When
      the
      cooperation intention is formally acknowledged by both Party A and Party B,
      they
      will co-designate a qualified intermediary organization to conduct audit and
      evaluation on the assets and financial state of Party A on the base date settled
      by them together, and settle the purchasing price with consideration on the
      Joint Venture’s development potential and profitability. 

    

    5.4
      Party
      B contributes monetary fund. 

    

    5.5
      Ownership interest. 

    According
      to its amount of registered capital, Laiwu Iron&Steel Group Co.Ltd. has 20%
      of the ownership interest of the Joint Venture; 

    According
      to its amount of registered capital, General Steel Holdings Inc. has 80% of
      the
      ownership interest of the Joint Venture. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    5.6
      Investment scope. 

    --Phase
      I
      after the establishment of the Joint Venture, the first sum of investment will
      be used into the purchase of the equity held by the Trade Union Committee of
      Yantai Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group and Yantai Hengchang
      Investment Co., Ltd..

    

    The
      purchase hereof can be completed by cash or by stock replacement, in other
      words, the Party A’s stock held by its employees and management can be
      converted, according a rate, into the stock of Party B, which is negotiable
      stock traded at the New York Stock Exchange, the U.S.. 

    

    --Phase
      II after the establishment of the Joint Venture, Parties shall continue capital
      injection by their share proportions (if a Party stops capital injection, its
      proportion of holding shares shall be reduced accordingly.), and the fund shall
      be used to build a 273 hot-rolling line. 

    

    The
      rate
      between RMB and Dollar shall be converted by the benchmark exchange rate
      announced by the Bank of China on the payment date. 

    

    6.
      Terms
      on business confidentiality. 

    

    6.1.
      Business secret.

    Any
      information on technology or operation, publicly disclosed or undisclosed by
      a
      Party hereof, (including but not limited to product plan, sales plan, incentive
      policies, customers’ data, financial information, non-patent technologies,
      design, program, technological data, manufacturing skills, and information
      sources,) will constitute the Party’s business secrets. 

    

    6.2
      Confidentiality.

    Any
      Party
      hereof shall bear the obligation to keep the other Party’s any business secret
      disclosed in the letter of intent; at any time any Party shall not reveal the
      other Party’s business secret to any Third Party; with no a written approval,
      any Party hereof shall not disclose the other Party’s business secret to any
      Third Party. Any direct or undirect losses causing from any Party’s violation
      against the Article hereof shall be fully compensated. 

    

    6.3
      Parties hereof still have obligations to keep the business secrets of the other
      Party after the termination of the agreement. 

    

    Party
      A:
      Yantai Steel Pipe Co., Ltd. of Laiwu Iron&Steel Group (Chinese).

    Signature:
      

    Date:
      

    

    Party
      B:
      General Steel Holdings Inc., 

    Signature:
      

    Date:Unassociated Document

    

      Distribution
        Instructions

      Company
        name: General Steel Holdings, Inc.

      Account
        number:  925544

      Distribution
        Circuit(s): US1+First
        Call 

      Distribution
        Time: September
        3rd,
        2008, 6 A.M. US Eastern Time

      Dateline
        City: Beijing

      Contact
        Information: Public 

      Special
        Instructions: Need final approval 

      For
        any
        questions regarding this release, please call: Jing Ou-Yang

      Contact
        Person: Jing Ou-Yang

      Phone
        Number: +86-10-5879-7346 (Beijing Office) 

      Cell
        Number: +86-1380-107-0926

      

      

      General
        Steel Holdings, Inc. Announces Letter of Intent to Acquire

      Yantai
        Steel Pipe Co., Ltd. 

      

      BEIJING,
        China, September 3rd, 2008 / Xinhua-PRNewswire/--General Steel Holdings,
        Inc.
        (“General Steel”), (“Company”), (NYSE: GSI), one of China's leading non-state
        owned steel products producers, announced today it has signed a Letter of
        Intent
        to acquire 80% of Yantai Steel Pipe Co., Ltd. of Laiwu Iron & Steel Group
        (“Yantai Steel Pipe”). Upon
        completion of the proposed acquisition, Yantai Steel Pipe will become a
        Chinese-foreign joint venture, for which General Steel will have 80% ownership
        interest and Laiwu Iron & Steel Group will have 20% ownership interest. The
        completion of this acquisition is subject to certain closing conditions,
        including satisfactory completion of due diligence and execution of the
        Definitive Agreement. The Company anticipates providing further details
        including specific financial terms on this proposed transaction upon
        consummation of the final Definitive Agreement. 

      

      The
        joint
        venture will preserve the existing production systems of Yantai Steel Pipe
        and
        build a new production line for hot rolling seamless pipe. The production
        capacity of the joint venture is designed to be 500,000 - 600,000 tons annually.
        The main products of the joint venture include oil pipe (tube), boiler pipe
        (tube), hydraulic pipe (tube) and those used in mechanical structures.

      

      “We
        are
        very excited to have signed a Letter of Intent with Yantai Steel Pipe, a
        company
        with a 50 year operating history, an established brand name and a well developed
        distribution network.” said Henry Yu, CEO and Chairman of General Steel
        Holdings, Inc. He added, “This is an especially attractive opportunity for us,
        as Yantai Steel Pipe, through its subsidiary, Yantai Lubao Steel Pipe Co.,
        Ltd,
        will enable us to generate higher margin revenues through its seamless steel
        pipe products.” 

      

      Yantai
        Lubao Steel Pipe Co., Ltd, a subsidiary of Yantai Steel Pipe, is owned 20.18%
        by
        Yantai Steel Pipe and 79.82% by Baosteel Group Corporation. 

      

      
        
           

        

        
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      Mr.
        Wei
        Xu, President of Yantai Steel Pipe stated, “The steel industry in China is
        undergoing rapid change and consolidation. The ability to forge a strong
        working
        relationship with a forward-looking company like General Steel gives us a
        great
        deal of confidence. We are very happy to have signed this Letter of Intent
        with
        General Steel and look forward to a promising future.”

      

      About
        General Steel Holdings, Inc. General
        Steel Holdings, Inc., headquartered in Beijing, operates a diverse portfolio
        of
        Chinese steel companies. With 4.8 million tons aggregate production capacity,
        its companies serve various industries and produce a variety of steel products
        including rebar, hot-rolled carbon and silicon sheet, high-speed wire and
        spiral-weld pipe. The Company has steel operations in Shaanxi and Guangdong
        provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For
        more
        information, go to www.gshi-steel.com.

      

      About
        Yantai Steel Pipe Co., Ltd.

      Founded
        in 1958 and located in the port city of Yantai in Shandong province, Yantai
        Steel Pipe Co., Ltd. is a subsidiary of Laiwu Steel Group Ltd. and an
        established manufacturer of seamless steel pipes and tubes. It has an annual
        production capacity of 300,000 tons. Products represent 10 varieties of seamless
        steel pipes and tubes with a diameter range of 6mm to 219mm and a wall thickness
        range of 1mm to 50mm. 

      

      

      Information
        Regarding Forward-Looking Statements 

      This
        press release may contain certain forward-looking statements within the meaning
        of the Private Securities Litigation Reform Act of 1995. These statements
        are
        based on management's current expectations or beliefs about future events
        and
        financial, political and social trends and assumptions it has made based
        on
        information currently available to it. The Company cannot assure that any
        expectations, forecasts or assumptions made by management in preparing these
        forward-looking statements will prove accurate, or that any projections will
        be
        realized. Such forward-looking statements may be affected by inaccurate
        assumptions or by known or unknown risks or uncertainties. Actual results
        may
        vary materially from those expressed or implied by the statements herein.
        For
        factors that could cause actual results to vary, perhaps materially, from
        these
        forward-looking statements, please refer to the Company's Form 10-K, filed
        with
        the Securities and Exchange Commission, and other subsequent filings.
        Forward-looking statements contained herein speak only as of the date of
        this
        release. The Company does not undertake any obligation to update or revise
        publicly any forward-looking statements, whether to reflect new information,
        future events or otherwise.

      

      For
        more
        information, please contact:

      

      
        	Jing Ou-Yang, General Steel Holdings,
                Inc.	Ted Haberfield, HC International,
                Inc.
	Tel: +86-10-5879-7346 (Beijing)	Tel +1-760-755-2716 (USA)
	Email: jing@gshi-steel.com  	Email:thaberfield@hcinternational.net
	Skype: jingouyang2 	Web:
                www.hcinternational.net

      

       

      
        
           

        

        
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