Sino-foreign Joint Venture

SINO-FOREIGN JOINT VENTURE


FUJIAN HUALONG CARBURETOR CO. LTD.


JOINT VENTURE CONTRACT


CHAPTER I GENERAL PROVISIONS


ARTICLE 1


In accordance with "The Law of the People's Republic of China on Sino-Foreign Joint Ventures" and other relevant Chinese laws and regulations, adhering to the principle of equality and mutual benefit and through friendly consultations, it is hereby agreed that Fujian Hualong Carburetor Co. Ltd., a limited liability company (hereinafter referred to as the "Joint Venture Company"), shall be set up in Fuding County, Fujian Province. The contract is worked out hereunder.


CHAPTER II PARTIES TO THE JOINT VENTURE


ARTICLE 2 Parties to the joint venture:


FUJIAN FUDING CARBURETOR FACTORY (hereinafter referred to as "Party A"), registered in Fuding County, with its legal address at No. 9, Longahan Industrial District, Fuding County.


Legal representative: Zhou Tixu, position: Chairman cum Factory Manager, Nationality: Chinese.


TWIN WINNER TRADING CO., LTD. of Hong Kong (hereinafter referred to as "Party B"), registered in Hong Kong, with its legal address at Shun Tak Centre 33/F, No. 200, Connaught Road, Central Hong Kong.


Legal representative: Liang Xin Hai, Position: General Manager, Nationality: Chinese.


WALBRO ENGINE MANAGEMENT CORPORATION (hereinafter referred to as "Party C"), registered in United States of America, with its legal address at 6242 Garfield Street, Cass City, Michigan 48726-0096 U.S.A.


Legal representative: Robert Wapole, Nationality: American. 2


CHAPTER III ORGANIZATION OF THE COMPANY AND SCOPE OF BUSINESS


ARTICLE 3


The name of the Joint Venture Company is Fujian Hualong Carburetor Co. Ltd.


Its name in English is FUJIAN HUALONG CARBURETOR CO. LTD.


ARTICLE 4


The organization form of the Joint Venture Company is a limited liability company.


ARTICLE 5


The legal address of the Joint Venture Company: No. 9, Longahan Industrial Zone, Fuding County, Fujian Province.


ARTICLE 6


The purpose of the Joint Venture Company shall be: to strengthen economic cooperation and technological exchange; to import advanced technology, equipment and methods of management; to develop carburetors for motorcycles, and automobiles; to enhance the quality of products and raise the competitiveness of the enterprise; to devote itself to domestic production of carburetors and at the same time make its entry into the international market so as to create more wealth and better economic benefit for the society, thereby achieving satisfactory economic benefits for each investor.


ARTICLE 7


The business scope of the Joint Venture Company is to produce, manufacture and develop various types of series of carburetors and other related spare parts and accessories for motorcycles and automobiles for the domestic and foreign markets.


ARTICLE 8


All activities of the Joint Venture Company shall be governed by the laws, decrees and pertinent rules and regulations of the People's Republic of China.


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CHAPTER IV TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL


ARTICLE 9


The total amount of investment of the Joint Venture Company is US$2,500,000, which shall be the registered capital of the Joint Venture Company. Of the said amount:


Party A shall contribute US$750,000, accounting for 30%;
Party B shall contribute US$250,000, accounting for 10%
Party C shall contribute US$1,500,000, accounting for 80%


Party C shall contribute its investment in foreign exchange (calculated at the foreign exchange swap rate of the Fujian Province Forax Swap Centre on the date the payment is made).


ARTICLE 10


Each party to the Joint Venture Company is liable to the Joint Venture Company within the limit of the capital subscribed by it. The profits, risks and losses of the Joint Venture Company shall be shared by the parties in proportion to their contributions to the registered capital.


ARTICLE 11


The parties shall contribute the following as their investment:


Party A and Party B: In the form of the existing assets of plant and machinery, factory, buildings, inventory, etc., confirmed by a valuation agency to be worth Renminbi 7,500,000 (deemed to be the equivalent of US$850,000), and any deficit thereof shall be made good with Renminbi 1,320,000 (deemed to be the equivalent of US$150,000) (calculated at the foreign exchange swap rate of the Fujian Province Forax Swap Centre on the date the contribution is made).


Party C shall contribute its investment in foreign currency in the sum of US$1,500,000.


ARTICLE 12


The registered capital of the Joint Venture Company shall be paid in full into the Joint Venture Company's bank with which it operates an account by the parties in proportion to their respective contributions within six months after this Contract takes effect.


ARTICLE 13


The parties to the Joint Venture Company shall pay in full their respective investments within the time stipulated in this Contract. In the event of any party failing to make payment


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or failing to pay in full their share of the contribution, any profit made by the Joint Venture Company shall be shared by the parties in proportion to the actual investment made.


ARTICLE 14


In case any party intends to assign all or part of the investment subscribed by it to a fourth party, consent shall be obtained from the other parties and approval from the examination and approval authority is required.


When one party assigns all or part of its Investment, the other parties have a preemptive right.


The terms and conditions of assignment by any part to a fourth party shall not be more favorable than the terms of assignment to the other parties.


CHAPTER V BOARD OF DIRECTORS AND MANAGEMENT ORGANIZATION


ARTICLE 15


The Joint Venture Company shall establish a Board of Directors, which shall be its highest authority and shall decide all major issues concerning the Joint Venture Company.


ARTICLE 16


The Board of Directors shall comprise seven Directors. The number of Directors shall be discussed between and determined by the parties by reference to the proportion of their capital contribution. Two of the Directors shall be appointed by Party A, one by Party B and four by Party C. The Chairman of the Board shall be appointed by Party C, and the Vice-Chairman by Party A. The term of office for the Chairman, Vice-Chairman and Directors is four years; their term of office may be renewed if continuously appointed by the relevant party.


ARTICLE 17


The Board of Directors shall convene at least one meeting every year. The meeting shall be called and presided over by the Chairman of the Board. Should the Chairman be absent, the Vice-Chairman shall call and preside over the Board meeting.


The Chairman may convene an interim meeting based on a proposal made by more than one-third of the total number of Directors. The Board meeting requires a quorum of over two-thirds of the total number of Directors. Should a Director be unable to attend the Board meeting, he shall appoint a proxy in written form to attend and vote on his behalf.


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If the Director of any party neither attends a Board meeting nor appoints a proxy, and as a result the meeting does not have a sufficient quorum, the meeting shall be adjourned for 30 days and the Director not in attendance shall receive a written notice.


In the event that the number of Directors attending an adjourned meeting shall be less than the quorum of two-thirds, such number in attendance shall be deemed to be the quorum. And such Directors shall be entitled to pass resolutions by majority vote on all matters except for the four set out in Article 18.


ARTICLE 18


Resolutions with respect to the following matters shall require the unanimous approval of the Directors present at a Board meeting:


(1) Amendment of the Articles of Association of the Joint Venture
Company;


(2) Termination or dissolution of the Joint Venture Company;


(3) Increase in or assignment of the registered capital of the
Joint Venture Company;


(4) Merger of the Joint Venture Compa ...