Sino-foreign Equity Joint Venture Contract

EXHIBIT 10(xxxi)


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SINO-FOREIGN EQUITY JOINT VENTURE CONTRACT


FOR


RONGCHENG CHENGSHAN STEEL CORD COMPANY LTD


BY AND BETWEEN


CHENGSHAN GROUP COMPANY LIMITED


AND


CTB (BARBADOS) INVESTMENT CO. LTD.


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OCTOBER 27, 2005


TABLE OF CONTENTS


CHAPTER PAGE - ------- ---- CHAPTER 1 DEFINITIONS............................................... 01


CHAPTER 2 PARTIES TO THE CONTRACT................................... 01


CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE........................ 02


CHAPTER 4 PURPOSE AND BUSINESS SCOPE OF THE JOINT VENTURE........... 03


CHAPTER 5 TOTAL INVESTMENT AND REGISTERED CAPITAL................... 03


CHAPTER 6 REPRESENTATIONS AND WARRANTIES............................ 05


CHAPTER 7 RESPONSIBILITIES OF THE PARTIES........................... 06


CHAPTER 8 BOARD OF DIRECTORS........................................ 08


CHAPTER 9 OPERATION AND MANAGEMENT.................................. 11


CHAPTER 10 LABOR MANAGEMENT.......................................... 13


CHAPTER 11 FINANCIAL AFFAIRS AND ACCOUNTING.......................... 14


CHAPTER 12 PROFIT DISTRIBUTION....................................... 15


CHAPTER 13 TAXATION AND INSURANCE.................................... 16


CHAPTER 14 PURCHASE OF MATERIALS AND SALE OF PRODUCTS................ 16


CHAPTER 15 CONFIDENTIALITY AND NON-COMPETE........................... 16


CHAPTER 16 DURATION, TERMINATION AND LIQUIDATION..................... 18


CHAPTER 17 BREACH OF CONTRACT........................................ 22


CHAPTER 18 FORCE MAJEURE............................................. 22


CHAPTER 19 DISPUTE RESOLUTION........................................ 23


CHAPTER 20 GOVERNING LAW & CHANGE OF LAW............................. 24


CHAPTER 21 EFFECTIVE DATE OF THE CONTRACT............................ 24


CHAPTER 22 MISCELLANEOUS PROVISIONS.................................. 24


APPENDIX 1 DEFINITIONS AND INTERPRETATION............................ 28


APPENDIX 2 EQUITY TRANSFER/PLEDGE RULES.............................. 32


APPENDIX 3 SHARE PURCHASE AGREEMENT 35


EQUITY JOINT VENTURE CONTRACT


This Sino-foreign Equity Joint Venture Contract (this "CONTRACT") is made and entered into in the People's Republic of China ("CHINA" or "PRC") on this 27th. day of October, 2005, in accordance with the PRC Sino-foreign Equity Joint Venture Law (the "JOINT VENTURE Law") and other relevant PRC laws and regulations, by and among:


(1) CHENGSHAN GROUP COMPANY LTD., a limited liabilities company duly organized
and existing under the laws of the PRC with its legal address at No 98,
North Nan Shan Road, Rongcheng City, Shandong Province, PRC ("PARTY A");
and


(2) CTB (BARBADOS) INVESTMENT CO. LTD., a company duly organized and existing
under the laws of [Barbados] with its legal address at Chancery House,
High Street, Bridgetown, Barbados, W. I. ("PARTY B").


(Each party is hereinafter individually referred to as a "PARTY" and collectively as the "PARTIES".)


WHEREAS:


(A) On the date of this Contract, Party A and Mr. Teng Liu-zhi [CHINESE
CHARACTERS] ("MR. TENG") are the existing shareholders of Rongcheng
Chengshan Steel Cord Co., Ltd. (the "COMPANY"), a limited liability
company duly organized and existing under the laws of the PRC;


(B) Party A will purchase from Mr. Teng, and Mr. Teng has agreed to sell to
Party A, the Company's equity interests owned by Mr. Teng. Therefore,
Party A will own all the equity interests of the Company prior to the
Completion Date (as such term defined in the Share Purchase Agreement);


(C) Party A has agreed to sell to Party B, and Party B has agreed to purchase
from Party A, a portion of twenty five percent (25%) of the equity
interest of the Company in accordance with the terms and conditions of the
Share Purchase Agreement entered into among Party A, Party B and the
Company on the date of this Contract; and


(D) In accordance with the principles of equality and mutual benefit, the
Parties have held friendly negotiations in relation to the terms and
conditions for converting the Company from a domestic limited liability
company into a Sino-foreign equity joint venture.


NOW, THEREFORE, the Parties hereby agree as follows:


CHAPTER 1 DEFINITIONS


Unless the terms or context of this Contract provide otherwise, capitalized terms used herein without definition have the meanings assigned to them in Appendix 1 attached to this Contract.


CHAPTER 2 PARTIES TO THE CONTRACT


2.1 The Parties. The Parties to this Contract are as follows:


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(1) Party A: Chengshan Group Company Ltd.


Country of Registration: PRC


Legal Address: No. 98, Nanshan Road North, Rongcheng
City, Shandong Province, PRC


Current Legal Representative: Che Hong-Zhi


Nationality: Chinese


(2) Party B: CTB (BARBADOS) INVESTMENT CO. LTD.


Country of Registration: Barbados


Legal Address: Chancery House, High Street,
Bridgetown, Barbados, W. I.


Current Legal Representative: Harold C. Miller


Nationality: U.S.A.


CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE


3.1 Establishment of the Joint Venture. In accordance with the Joint Venture
Law and other relevant PRC laws and regulations, the Parties hereby enter
into this Contract for the establishment of the Joint Venture as a
Sino-foreign equity joint venture in the form of a limited liability
company.


3.2 Joint Venture Name, Legal Address.


(1) The name of the Joint Venture in English is "Rongcheng Chengshan
Steel Cord Company Ltd."


The name of the Joint Venture in Chinese is [CHINESE CHARACTER]


(2) The legal address of the Joint Venture is Chengshan Road, Rongcheng
City, Shandong Province, PRC.


3.3 Limited Liability Company. The Joint Venture shall be organized as a
company with limited liability under PRC law, liable for its own debts
with its own assets. The liability of each Party shall be limited to the
amount of the Registered Capital expressly subscribed by such Party. No
Party shall be obligated at any time to provide any funds to, or on behalf
of, the Joint Venture by way of capital contribution, loan, advance,
guarantee or otherwise, except as specifically provided in this Contract,
or as otherwise agreed to in writing by the Parties. The Parties shall not
be liable for the debts of the Joint Venture, unless otherwise
specifically agreed in writing between a particular creditor and the Party
or Parties concerned. Subject to the terms and conditions of this
Contract, the profits, risks and losses of the Joint Venture shall be
shared by the Parties in proportion to their respective contributions to
the Registered Capital.


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3.4 PRC Law. The activities of the Joint Venture shall be governed by, and its
legal rights and operational autonomy shall be protected in accordance
with, the laws and regulations of the PRC.


CHAPTER 4 PURPOSE AND BUSINESS SCOPE OF THE JOINT VENTURE


4.1 Purpose of Joint Venture. The purpose of the Joint Venture is to use
advanced technology and management methods to develop, manufacture and
sell the Products on the international and domestic markets and to earn a
satisfactory return on investment for the Parties.


4.2 Scope of Business. The Joint Venture's scope of business shall be to
design, develop, manufacture, and process (consuming both domestic and
imported materials) steel cords and tire bead wires; provide technical
support and after sales service for such products; and market and sell
such products.


CHAPTER 5 REGISTERED CAPITAL


5.1 Registered Capital. The Registered Capital of the Joint Venture shall be
Renminbi one hundred and thirty million (RMB(Y)130,000,000).


5.2 Schedule for Capital Contributions. For avoidance of doubt, the Parties
hereby agree that (i) conversion of the Party A's equity interest of the
Company into its Percentage Interest in the Registered Capital of the
Joint Venture on the Establishment Date; and (ii) completion of Party B's
payment of the Transaction Price (as such term defined in the Share
Purchase Agreement) pursuant to the payment schedule stipulated in Article
3.1 under the Share Purchase Agreement shall be deemed as completion of
capital contribution of the Parties to the Joint Venture.


5.3 Conditions Precedent to the Contribution of Registered Capital.


The Parties' contribution to the Registered Capital of the Joint Venture
pursuant to Article 5.2 hereof shall be conditioned on the satisfaction of
all of the following:


(1) Party A has acquired all the equity interests of the Company;


(2) the Examination and Approval Authority has issued a Certificate of
Approval, and any required changes to this Contract have been agreed
to in writing by the Parties;


(3) a Business License has been granted to the Joint Venture which
authorizes the full scope of business of the Joint Venture described
in Article 4.2 or any required changes thereto have been agreed to
in writing by the Parties; and


(4) all Parties have obtained corporate approvals in respect of this
Contract from their respective board of directors as may be
necessary.


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5.4 Capital Contribution Verification and Certificate. An accountant
registered in the PRC shall be engaged by the Joint Venture to verify the
respective capital contributions of each Party and provide a capital
verification report(s) accordingly. The Joint Venture, upon the receipt of
a satisfactory capital verification report, shall issue a capital
contribution certificate to the relevant Party. This certificate shall
include the following items: name of the Joint Venture; the Establishment
Date; the names of the Parties and the amount of their respective capital
contributions; the date on which the capital contributions were made; and
the date of issuance of the capital contribution certificate. Each capital
contribution certificate shall be signed by the Chairman and the
Vice-Chairman of the Joint Venture. The capital contribution certificates
shall only certify the investment of each Party and shall not be deemed as
a note or other negotiable instrument.


5.5 Financing. Subject to the terms and conditions of this Contract, to the
greatest extent permitted by relevant law, the Joint Venture may finance
its operations and capital needs by way of loans, including but not
limited to shareholder loans, loans from such banks, other financial
institutions or qualified lenders inside or outside of China and upon such
terms and subject to such conditions as may be approved by the Board.


Party A hereby undertakes to appropriately support, and to the extent
necessary, provide a loan at an amount of US$ 6,400,000 to the Joint
Venture as soon as practicable upon the Completion (as such term defined
in the Share Purchase Agreement), which shall have a term of at least 10
years bearing interest at the prevailing market rate and will be
subordinated to the claims against and liabilities incurred by the Joint
Venture.


5.6 Increase of Registered Capital. The Registered Capital of the Joint
Venture may be increased by a unanimous resolution of the Board, which
resolution shall stipulate the timing and other terms of such increase,
with such increase subject to the approval of the Examination and Approval
Authority and registration with the Registration Authority. If any Party
chooses not to participate in any such additional investment in the Joint
Venture, the other Party shall have the option to make the additional
contribution to the Joint Venture's Registered Capital and the ownership
percentages of the Parties' equity interests in the Joint Venture shall be
adjusted accordingly.


5.7 Transfer of Equity Interests.


(1) If one Party wishes to transfer all or part of its Percentage
Interest in the Joint Venture to any third party, it shall obtain
the written consent of (including waiver of preemptive rights by)
the other Party, and the transfer shall be presented to the
Examination and Approval Authority for approval. The Party agree to
be bound by the detailed rules set forth in Appendix 2 attached to
this Contract, which rules are to implement the principle described
in the preceding sentence.


5.8 Share Purchase. On the date of this Contract, Party A and Party B shall
enter into a share purchase agreement (the "SHARE PURCHASE AGREEMENT") in
substantially the form attached as Appendix 3 hereto, pursuant to which
Party A has agreed to sell to Party B, and Party B has agreed to purchase
from Party A, twenty five percent (25%) of the equity interest of the
Company in accordance with the terms and conditions therein.


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CHAPTER 6 REPRESENTATIONS AND WARRANTIES


6.1 Representations and Warranties. Each Party hereby represents and warrants
that, as of the date of this Contract and as of a date on which a Party
makes a capital contribution to the Joint Venture in accordance with
Article 5.2 herein, it:


(1) has the capacity and authority to enter into this Contract and to
perform its obligations hereunder, and is duly organized and validly
existing under the laws of the PRC in the case of Party A, and under
the laws of Barbados in the case of Party B;


(2) is not a party to, bound by or subject to any contract, instrument,
charter or by-law provision, statute, regulation, order, judgment,
decree or law which would be violated, contravened or breached by,
or under which any default would occur as a result of, the execution
and delivery by such Party of this Contract or the performance by
such Party of any of the terms of this Contract, or which restricts
such Party from entering into this Contract or performing its
obligations and abiding by the terms hereunder;


(3) has duly authorized, executed and delivered this Contract and that
this Contract constitutes a legal, valid and binding obligation
enforceable in accordance with its terms;


(4) will contribute capital or transfer shares in a manner which does
not conflict with, violate or result in a breach of, any of the
terms, conditions or provisions of any law, regulation, order, writ,
injunction, decree, determination or award of any court,
governmental department, board, agency or instrumentality or any
arbitrator, or result in the creation or imposition of any lien,
charge, security interest or encumbrance of any nature whatsoever
upon such capital or shares;


(5) freely enters into this Contract and has not and will not hereafter
incur any obligations or commitments of any kind which would in any
way hinder or interfere with its acceptance or performance of its
obligations hereunder; and


(6) (i) has carefully read the entire Contract including the Appendices
hereto; (ii) fully understands all of the terms, conditions,
restrictions and provisions set forth in this Contract, (iii) agrees
that the terms, conditions, restrictions and provisions herein are
necessary for the reasonable and proper protection of the business
of the Joint Venture and the other Party, and (iv) acknowledges that
each such term, condition, restriction and provision is fair and
reasonable with respect to the subject matter thereof.


6.2 Representations and Warranties in Respect of the Company's Equity
Interest. In respect of the Company's equity interest relating to the
share purchase specified in Article 5.8 hereof, Party A represents,
warrants and undertakes to Party B, as of the date of this Contract and as
of the Completion Date (as such term defined in the Share Purchase
Agreement), those representations, warranties and undertakings set forth
in the Share Purchase Agreement are true, accurate and complete.


6.3 Cure and Indemnification Obligations.


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(1) In case of any breach of the Contract by any Party, it shall, in
accordance with the direction of the non-breaching Party within
thirty (30) days after receiving a notice of the non-breaching Party
concerning any breach, take all necessary actions to cure such
breach.


(2) Each Party agrees to indemnify and hold the other Party and the
Joint Venture harmless from and against any and all claims, losses,
damages, and costs arising out of any of its breach of any of its
covenants or representations and warranties contained herein, .


CHAPTER 7 RESPONSIBILITIES OF THE PARTIES


7.1 Party A's Responsibilities. In addition to its other obligations under
this Contract, Party A shall be responsible for the following matters:


(1) Providing capital contributions in accordance with the terms and
conditions of this Contract;


(2) Using its best endeavors (acting at all times in close consultation
with Party B) to assist the Joint Venture to:


(a) obtain all necessary governmental approvals and completing all
required registrations for the establishment and operation of
the Joint Venture;


(b) liaise with PRC national, provincial, municipal or local
governmental authorities and other relevant institutions or
organizations;


(c) obtain the most preferential tax, customs, foreign exchange
and other favorable treatment that are or may become available
to the Joint Venture and/or the Parties under relevant
national and local laws and regulations of the PRC; and


(d) procure necessary equipment, materials, articles for office
use, means of transportation, telecommunications facilities
and other public utilities, in accordance with the Joint
Venture's request.


(3) Using its best endeavors (acting at all times in close consultation
with Party B) to assist the Joint Venture to register with the
relevant tax bureau, to open such foreign exchange and RMB bank
accounts, assist the Joint Venture with all required foreign
exchange approvals, and assist the Joint Venture in applying for all
approvals required to remit to Party B in foreign exchange
distributable profits and all other payments required to be paid to
Party B;


(4) Providing necessary assistance to the Joint Venture in recruiting
suitable management personnel, technical personnel and other
necessary employees to be employed by the Joint Venture;


(5) Assisting the Joint Venture to contact banks and other financial
institutions inside the PRC and hold discussions with them with
respect to the raising of any loans required by the Joint Venture;


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(6) Assisting foreign workers, staff, and personnel (including
Directors, managers, technicians, and contractors appointed or
selected by Party B) in obtaining PRC visas and work permits for
travel to China directly related to the operation of the Joint
Venture if requested by Party B;


(7) Be responsible for any environmental pollution, fines, charges or
losses caused by it prior to the Establishment Date, and indemnify
the Joint Venture for any financial burden and/or losses arising out
of any contamination caused by it prior to the Establishment Date;


(8) Providing a shareholder loan to the Joint Venture according to
Article 5.5 herein; and


(9) Assisting with and carrying out other relevant matters as may be
reasonably requested by the Board from time to time.


7.2 Responsibilities of Party B. In addition to its other obligations under
this Contract, Party B and shall be responsible for the following matters:


(1) Providing capital contributions in accordance with the terms and
conditions of this Contract;


(2) Providing any necessary assistance to the Joint Venture's
recruitment of suitable expatriate management personnel, technical
personnel and other necessary expatriate employees to be employed by
the Joint Venture on the basis of merit;


(3) Assisting the Joint Venture to contact banks and other financial
institutions outside of the PRC and hold discussions with them with
respect to the raising of any foreign exchange loans required by the
Joint Venture;


(4) Assisting the Joint Venture in training key staff and employees;


(5) Seconding relevant management personnel, technical personnel and
other necessary staff to work for the Joint Venture as per the Joint
Venture's request; and


(6) Assisting with and carrying out other relevant matters requested by
the Joint Venture from time to time.


7.3 Related Party Transactions. The Parties shall procure that all related
party transactions with respect to the Joint Venture shall be transparent
to the Parties and be conducted on an arm's length basis, provided
however, it is the intention of the Parties that if the price, quality and
delivery of the Products meet the requirements of the Tire JVs, the Tire
JVs will purchase from the Joint Venture. Any significant purchases
(including purchases of raw materials) by the Joint Venture from the
Parties or their Affiliates shall be approved by the Board in accordance
with Article 8.3 herein.


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CHAPTER 8 BOARD OF DIRECTORS


8.1 Formation of the Board.


(1) The Board shall be the highest authority of the Joint Venture. It
shall discuss and determine all strategic business and financial
issues and operational issues of the Joint Venture in accordance
with the provisions of this Contract and the Articles of
Association.


(2) The Board shall consist of three (3) Directors, of which two (2)
shall be appointed by Party A and one (1) shall be appointed by
Party B. At the time this Contract is executed and when replacement
Directors are appointed, the Parties shall notify one another in
writing of the names and addresses of its appointees, together with
a brief curriculum vitae and a list of other official functions, if
any, that the relevant appointees will concurrently carry out for
the Joint Venture. Each Party shall cause the Directors appointed by
it to perform the obligations specified in this Contract and as
required under relevant PRC laws and regulations.


(3) Directors shall each be appointed for terms of four (4) years, and
may serve consecutive terms if reappointed by the Party originally
appointing such Director.


(4) Any Party may, at any time with or without cause, remove and replace
a Director that it has appointed by written notice to the Joint
Venture and to the other Party. If a seat on the Board is vacated
due to the retirement, resignation, illness, disability or death of
a Director or by the removal of such Director by the original
appointing Party, the Party which originally appointed such Director
shall appoint a successor to serve the remainder of such Director's
term.


(5) If either Party or the Board has reason to believe that a Director
has materially breached his/her duties as a Director (provided such
breach appear to be supported by reasonable grounds as determined by
a simple majority of the Directors), or has been convicted of
committing an act or omission constituting fraud, theft,
embezzle ...