Huai’an China http://www.huaian.gov.cn Article 1 These provisions are formulated hereby pursuant to the Company Law of the People’s Republic of China, the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures, the Law of the People’s Republic of China on Contractual Joint Ventures, the Law of the People’s Republic of Foreign-funded Enterprises, and other pertinent laws and regulations to promote the healthy development of foreign-funded enterprises, protect the legitimate rights and interests of investors, and maintain social and economic order. Article 2 "Alteration of investors" equities in foreign-funded enterprises as used in these Provisions refers to alteration of investors of Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures, foreign-funded enterprises set up on the territory of the People’s Republic of China (hereinafter referred to as the enterprise) or their shares (hereinafter referred to as equities) of investment in the enterprise (including terms of cooperation they provide). It will include, but will not limit to, the following major factors leading to alteration of investors’s equities in foreign-funded enterprises: 1. Agreed transfer of equities between investors in the enterprise. 2. Transfer of equities to other related enterprises or other transferees by an investor in the enterprise with agreement from other investors. 3. Alteration of equities of each investing party due to readjustment of registered capital of the enterprise agreed to by investors in the enterprise. 4. Ownership of equities of investors by pledgees or beneficiaries in accordance with legal terms or contracts that have been pledged by investors in the enterprise to creditors with agreement from other investors. 5. Ownership of equities by inheritors, creditors or other beneficiaries in accordance with law due to bankruptcy, dismission, cancellation, revocation, or death of an investor in the enterprise. 6. Inheritance of equities of the initial investor by a successor due to merge or split of investors in the enterprise. 7. Alteration of investors or equities due to failure on the part of an investor in the enterprise to perform investment duties as stipulated in enterprise contracts or in articles of association, with approval from departments in charge of examination and approval. Article 3 Alteration of equities by an investor in the enterprise shall abide by pertinent Chinese laws and regulations, and be approved by examination and approval departments and submitted for alteration registration with registration departments in line with stipulations in these Provisions. Alteration of equities without approval from examination and approval departments shall be invalid. Article 4 Alteration of equities by an investor in the enterprise shall conform with stipulations in Chinese laws and regulations concerning the qualifications of investors and with requirements of China’s industrial policies. In line with the Catalogue of Industries for Overseas Investment, alteration of equities shall not lead to ownership of all the equities of an enterprise by an overseas investor in any of the sectors where exclusive overseas investment in the enterprise is not allowed. Should alteration of equities turn a Chinese enterprise into a foreign-funded enterprise, the requirements for setting up foreign-funded enterprises prescribed in the Implementing Rules of the Law of the People’s Republic of China on Foreign-funded Enterprises (hereinafter referred to as Rules on Foreign-funded Enterprises) shall also be met. In industries where State-owned assets take the holding or leading position, alteration of equities shall not lead to the taking of such a position by any foreign investors or other enterprises than State-owned ones. Article 5 Unless a foreign investor transfer all of its equities to the Chinese investor, alteration of equities by an investor in the enterprise shall not result in the sharing of investment by this foreign investor of less than 25 per cent of the registered capital of this enterprise. Article 6 With consent from other investors in the enterprise, the investor who has paid up its share of investment can pledge the equities that have been created with its share of investment to a pledgee by signing a pledging contract in line with pertinent stipulations in the Guarantee Law of the People’s Republic of China (hereinafter referred to as the Guarantee Law) and with approval from examination and approval departments. The investor shall not pledge the equities to be created with the part of investment it has not yet paid up. Neither shall the investor pledge its equities to the same enterprise it has invested in. During the period of pledge, the status of the pledgor as an investor in the enterprise shall not change. Without consent from the pledgor and other investors in the enterprise, the pledgee shall not transfer the pledged equities. Without consent from the pledgee, the pledgor shall not transfer or re-pledge the pledged equities. The rights and obligations of the pledgor and the pledgee and the content of the pledging contract shall be governed by pertinent stipulations in relevant laws, regulations and these Provisions. Article 7 The department to examine and approve the alteration of the equities by an investor in the enterprise shall be the examination and approval department that has approved the establishment of this enterprise. Should alteration of the equities of a Chinese investor in a Sino-foreign equity or contractural joint venture turn this venture into a foreign-funded enterprise and this enterprise specializes in the sector where foreign-funded enterprises are restricted as stipulated in Article 5 of the Rules on Foreign-funded Enterprises, the alteration of the equities of the Chinese investor in this venture shall be approved by the Ministry of Foreign Trade and Economic Cooperation of the People’s Republic of China (hereinafter referred to as the MOFTEC). Should changes take place in the equities of an investor in the enterprise due to multiplication of the enterprise’s registered capital and the total investment of this enterprise surpass the limit of amount authorized to handle by the original examination and approval department as a result, alteration of the equities of the investors in the enterprise shall be reported for examination and approval to a senior examination and approval department in line with the limit of power of this department and pertinent regulations. The department in charge of registration of alteration of equities of investors in the enterprise shall be the original registration department. Registration of alteration of equities approved by the MOFTEC shall be handled by the State Administration of Industry and Commerce or the original registration department with authorization from the Administration. Article 8 In case of alteration of the equities of a Chinese investor that has invested with State-owned assets, relevant departments in chage of valuation of State-owned assets shall evaluate the equities to be altered. Such evaluation shall also be verified by departments in charge of management of State-owned assets. The verified results of valuation shall be used as the basis for pricing the equities to be altered. Article 9 If equities must be altered due to reasons specified in the first and second clauses in Article 2 of these Provisions, the enterprise shall submit the following documents to examination and approval departments: 1. Application for alteration of equities of investors in the enterprise 2. The original contracts and articles of association of the enterprise and agreements on their revision. 3. Duplicates of certificates of approval for the establishment of the enterprise and business licenses. 4. Resolutions of the board of directors of the enterprise on the alteration of euqities of investors. 5. List of members on the board of directors after alteration of equities of investors in the enterprise. 6. Agreement on equity transfer reached between the transferor and the transferee and signed or confirmed in other written form by other investors. 7. Other documents required by examination and approval departments. Article 10 Agreements on the transfer of equities shall include the following major contents: 1. Names and residential addresses of transferors and transferees and the names, posts and nationalities of legal representatives. 2. Quantity and price of the equities to be transferred. 3. Limit of time and method for the delivery of transferred equities. 4. Rights to be enjoyed and responsibilities to be shouldered by the transferee according to enterprise contracts and articles of association 5. Responsibilities over breaches. 6. Laws to be applied and settlement of disputes. 7. Effectuation and termination of agreements. 8. The time when and the venue where the agreements are reached. Article 11 In case of alteration of equities due to reasons specified in the first and second clauses of Article 2 of these Provisions, the special stipulations promulgated by the MOFTEC and the State Administration of Industry and Commerce shall be observed. Apart from submitting documents specified in the first, second, third, fourth and fifth item of Article 9 of these Provisions, the enterprise shall also submit agreements on alteration of equities reached between its investors to examination and approval departments.