Exhibit 10.5
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 1 of 32
CONTRACT TO ESTABLISH
A SINO-FOREIGN JOINT VENTURE
XXXXXX XXXXXXXXXX BIOLOGICAL
ENGINEERING CO. LTD.
FEBRUARY 28, 2002
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 2 of 32
TABLE OF CONTENTS
PAGE
GENERAL PRINCIPLES 3
CHAPTER 1 DEFINED TERMS 3
CHAPTER 2 PARTIES TO THE JOINT VENTURE 5
CHAPTER 3 ESTABLISHMENT OF XXXXXX XXXXXXXXXX; NAME;
LIMITED LIABILITY 6
CHAPTER 4 PURPOSE, SCOPE AND SCALE OF OPERATION 6
CHAPTER 5 TOTAL AMOUNT OF INVESTMENT; REGISTERED CAPITAL;
PAYMENTS, CONDITIONS FOR PAYMENTS, USE AND
VERIFICATION OF REGISTERED CAPITAL 7
CHAPTER 6 CHANGE AND TRANSFER OF REGISTERED CAPITAL 10
CHAPTER 7 RESPONSIBILITIES OF PARTIES TO XXXXXX XXXXXXXXXX 11
CHAPTER 8 BOARD OF DIRECTORS 14
CHAPTER 9 MANAGEMENT 16
CHAPTER 10 PROCUREMENT 16
CHAPTER 11 LABOR 17
CHAPTER 12 TAX, ACCOUNTING AND AUDIT 18
CHAPTER 13 EARNING FOREIGN EXCHANGE 20
CHAPTER 14 REIMBURSEMENT FEES, DISTRIBUTIONS AND REMITTANCES 21
CHAPTER 15 DURATION OF WEIHAI BARRINGTON 22
CHAPTER 16 ADDITIONAL CONDITIONS FOR TERMINATION AND/OR
DISSOLUTION AND LIABILITIES FOR BREACH OF
CONTRACT 22
CHAPTER 17 PROCEDURES UPON TERMINATION 24
CHAPTER 18 INSURANCE 26
CHAPTER 19 FORCE MAJEURE 26
CHAPTER 20 CONFIDENTIALITY 27
CHAPTER 21 APPLICABLE LAW 27
CHAPTER 22 DISPUTE RESOLUTION 28
CHAPTER 23 LANGUAGE OF THIS CONTRACT 28
CHAPTER 24 EFFECTIVENESS OF THE CONTRACT AND MISCELLANEOUS 29
Appendix A INITIAL BOARD OF DIRECTORS AND EXECUTIVE
OFFICERS 32
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 3 of 32
GENERAL PRINCIPLES
This contract (the "Contract") is made in accordance with the " Law of the
People's Republic of China on Sino-foreign Contractual Joint Ventures" and its
Implementing Regulations (collectively, the "Joint Venture Law") and other
relevant promulgated and publicly available laws and regulations of the People's
Republic of China ("PRC"), by and between SHANDONG WEIGAO GROUP COMPANY, LTD.,
(hereafter `WEIGAO'), a limited liability enterprise organized and existing as a
legal person under the laws of the PRC (hereinafter referred to as "Party A")
and BARRINGTON SCIENCES CORPORATION, a corporation organized and existing under
the laws of Canada (hereinafter referred to as "Party B"). Separately, any one
party may be referred to herein as a Party, and jointly Parties A and B are
hereinafter referred to as the "Parties". Each Party adhering to the principle
of mutual respect, through friendly consultations, the Parties hereby agree to
establish WEIHAI BARRINGTON Biological Engineering Co. Ltd. (hereafter "WEIHAI
BARRINGTON"), a limited liability Sino-foreign contractual joint venture
enterprise (the "JV") in Weihai City, Shandong Province, PRC according to the
terms and conditions set forth below:
CHAPTER 1. DEFINED TERMS
Wherever used herein, the following terms shall have the references and meanings
set forth below:
"Affiliate" - means as to a person or entity, any person or entity that
directly, or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with such person or entity, including
without limitation, parent companies and subsidiaries.
"Approving Authority" -- MOFTEC.
" Articles of Association" - means the Articles of Association of XXXXXX
XXXXXXXXXX dated June 03, 2001, and executed by the Parties.
"XXXXXX XXXXXXXXXX" - means XXXXXX XXXXXXXXXX Biological Engineering Co.
Ltd., LIMITED, the joint venture limited liability company formed by The Parties
pursuant to this Contract and the Joint Venture Law.
"Board" or BOD - means the Board of Directors of XXXXXX XXXXXXXXXX.
"Business License Date" - means date the business license is duly issued to
XXXXXX XXXXXXXXXX.
"Control" - as used in the definition of "Affiliate" and elsewhere in this
Contract, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a person or entity,
whether through the ownership of voting securities or other equity interests, by
contract or otherwise, and the terms "controlled" and "common control" shall
have correlative meanings.
"Equivalent to US$" - means (a) the amount of RMB which, as of the date of
payment, could be converted into the stated amount in US dollars at the exchange
rate announced by the People's Bank of China based on the previous day's PRC
weighted average of buying and selling rates of the members of the China Foreign
Exchange Trading Center, an inter-bank foreign exchange trading market (the
"PBOC Rate"); (b) US dollar equivalent of the capital payments paid in-kind as
determined by appraisal of an appraiser mutually acceptable to Parties A and B;
(c) US dollars in cash; or (d) any combination of (a), (b) and (c) above.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 4 of 32
"Foreign Party" - means Party B.
"Force Majeure" -- Force Majeure shall have the meaning set forth in
Article 19.1.1.
"Joint Venture Law" - refers to the "Law of the People's Republic of China
on Sino-Foreign Contractual Joint Ventures" and its Implementing Regulations.
"MOFTEC" - refers to the PRC Ministry of Foreign Trade and Economic
Cooperation.
"Party" - refers to any single Party to this JV Contract.
"Parties" - refers to both Parties to the JV Contract jointly, or if
referred to as the Other Parties, then to BOTH PARTIES other than the Party
taking or causing action.
"PRC" - refers to the People's Republic of China.
"RMB" - means the lawful currency of the PRC.
"SAEC" - refers to the PRC State Administration of Exchange Control.
"SAIC" - the PRC State Administration of Industry and Commerce.
"Termination" - the termination of the JV Contract, as defined
further in the Contract,
`The Company' - XXXXXX XXXXXXXXXX BIOLOGICAL ENGINEERING CO. LTD
"US$" or "US dollar(s)" - means the lawful currency of the United States of
America.
"US GAAP" -- United States generally accepted accounting principles set
forth in the opinions and pronouncements of the United States Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements or pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entities as may be approved by a significant
segment of the accounting profession in the United States, which are applicable
to the circumstances as of the date of determination, and applied on a basis
consistent with all prior periods.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 5 of 32
CHAPTER 2. PARTIES TO THE JOINT VENTURE
Article 2.1 - Parties
---------------------
The Parties to this Contract are as follows:
2.1.1 Party A: SHANDONG WEIGAO GROUP COMPANY, LTD., a limited liability
company duly registered in Weihai City, Shandong Province, PRC, with
its legal address at Torch High Technology Industries Development
Zone, Weihai City, Shandong, PRC.
Legal Representative: Xxxx Xxx Xx
Title: Chairman
Nationality: PRC
Telephone number: (00) 000-000-0000
Facsimile number: (00) 000-000-0000
e-mail address XXXXXXX@XXXXXX.XXXXX.XX.XX
--------------------------
2.1.2 Party B: BARRINGTON SCIENCES CORPORATION, a corporation duly
established in British Columbia, Canada, with its principal
address at 00000 00xx Xxxxxx, Xxxxxx, X.X. V4N 2V3, Canada.
Legal Representative: Xxxxxx Xxxxx
Title: CEO
Nationality: British
Telephone number: (0) 000-000-0000
Facsimile number: (0) 000-000-0000
e-mail address XXXXXXXXXXX@XXXXXX.XXX
----------------------
2.1.3 In the event of a change in its legal or authorized representative,
such Party shall promptly notify the other Party of such change and the name,
position and nationality of its new legal or authorized representative.
Article 2.2 - Representations and Warranties
--------------------------------------------
Each Party represents that it is duly organized and established and validly
existing under the laws of the country of its incorporation. Each Party
respectively represents and covenants to the other Party that:
(a) it has the authority to enter into and perform this Contract and
the transactions contemplated by this Contract and its Appendices; that its
authorized or legal representative executing this Contract on its behalf is duly
authorized to sign on its behalf this Contract and to sign or procure the
signature of the other contracts and agreements contemplated hereunder; and upon
written request, it shall provide documentary evidence to this effect
satisfactory in form and substance to the requesting Party;
(b) the execution, delivery, and performance of this Contract and the
Articles of Association will not result in a breach of any of the terms and
provisions of, or constitute a default under, or conflict with any contract,
agreement or other instrument to which it is a party or by which it is bound,
any judgment, decree, order or award of any court, government body or
arbitrator, or any law, rule or regulation applicable to it, or of any of its
corporate organizational instruments (including its Articles of Incorporation or
Association or By-laws), or any agreement, license, privilege, permit or other
instrument entered into by such Party prior to the date of this Contract; and
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 6 of 32
(c) upon being duly executed by each of the Parties and approved by
the Approving Authority this Contract shall be binding upon the respective Party
in accordance with its terms.
CHAPTER 3. ESTABLISHMENT OF XXXXXX XXXXXXXXXX, NAME, LIMITED LIABILITY
Article 3.1 - Agreement to Establish
------------------------------------
In accordance with the Joint Venture Law, and other relevant PRC
promulgated and publicly available laws and regulations, and subject to the
terms and conditions set forth in this Contract, the Parties hereby agree to
establish XXXXXX XXXXXXXXXX in Weihai City, Shandong Province, PRC.
Article 3.2 - Name and Address
------------------------------
The name of XXXXXX XXXXXXXXXX in Chinese is [] [] [] [] [] [] [] [] []
The name of XXXXXX XXXXXXXXXX in English is XXXXXX XXXXXXXXXX BIOLOGICAL
ENGINEERING CO. LTD..
The name of XXXXXX XXXXXXXXXX shall be used to identify XXXXXX XXXXXXXXXX in
connection with any and all of its activities.
The legal address of XXXXXX XXXXXXXXXX shall be at Yantai Road West, Torch High
Technology Industrial Development Zone, Weihai, Shandong, PRC.
Article 3.3 - Limited Liability
-------------------------------
XXXXXX XXXXXXXXXX shall be a limited liability Sino-foreign contractual
joint venture enterprise. The liability of each Party to XXXXXX XXXXXXXXXX in
any and all circumstances is limited to the amount of the registered capital
subscribed by each Party as expressly set forth in Article 5.2 of this Contract.
Subject to the terms of any separate written contracts or guarantees entered
into by the Parties, the Parties shall have no liability, jointly or severally,
for any debts or obligations of XXXXXX XXXXXXXXXX other than the unpaid amount,
if any, of a Party's subscribed registered capital contribution to XXXXXX
XXXXXXXXXX. Subject to the preceding sentence, XXXXXX XXXXXXXXXX's debts and
obligations shall all be settled exclusively from the then existing assets of
XXXXXX XXXXXXXXXX.
CHAPTER 4. PURPOSE, SCOPE AND SCALE OF OPERATION
Article 4.1 - Purpose
---------------------
The purposes of the Parties in entering into this Contract and in
establishing WEIHAI BARRINGTON shall include the following items, which shall be
summarized in the business license of WEIHAI BARRINGTON as "to produce high
quality single use rapid test kits for Hepatitis, Tuberculosis and other
infectious diseases, and various other products for the medical industry for
sale within China and for export to other countries, to adopt advanced
technologies and scientific management methods in connection with the company;
to strengthen economic cooperation and technical exchanges; conduct economic
cooperation with domestic and foreign enterprises and importation of advanced
and applicable technology, key equipment and scientific management methods; and
to achieve satisfactory economic returns for the Parties.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 7 of 32
Article 4.2 - Scope of Operation
--------------------------------
The scope of the business of XXXXXX XXXXXXXXXX shall be; (a) to
develop a state-of-the-art rapid test device manufacturing facility and such
other facilities as agreed by the Parties; (b) to design, and operate systems
and facilities necessary for operation of the Company, (c) to purchase on the
PRC domestic market materials and products for any purpose consistent with
XXXXXX XXXXXXXXXX's business scope where quality, specifications, availability,
price and delivery time are competitive with overseas sources and, when these
supply criteria cannot be met in the PRC, to import machinery, equipment and
other supplies from overseas; (d) to conduct such other activities as may be
necessary or advisable and as permitted under PRC laws and regulations to effect
the stated purposes of XXXXXX XXXXXXXXXX's business; and (e) to perform such
ancillary activities as leasing, purchasing or building premises, establishing
and maintaining separate bank accounts in the PRC for foreign exchange and RMB,
swapping RMB and foreign exchange at any of the PRC's Foreign Exchange
Adjustment Centers or at a designated bank participating in the China National
Foreign Exchange Trade System, and engaging from time to time in such other
activities as may be necessary, relevant and appropriate to effect the stated
purposes of XXXXXX XXXXXXXXXX.
Article 4.3 - Scale of Operation
--------------------------------
The scale of the operations of XXXXXX XXXXXXXXXX is to produce in
Phase I up to 5,000,000 rapid test kits per month, plus such increased volumes
or other products, as the Parties may in the future determine to be in the best
economic interests of the Parties.
XXXXXX XXXXXXXXXX's products will be sold throughout the entire country of the
People's Republic of China. XXXXXX XXXXXXXXXX also plans to operate and conduct
business outside of the PRC and to export up to 70% of its products.
CHAPTER 5. TOTAL AMOUNT OF INVESTMENT; REGISTERED CAPITAL,
PAYMENTS, CONDITIONS OF PAYMENT, USE, AND
VERIFICATION OF REGISTERED CAPITAL
Article 5.1 - Total Amount of Investment
----------------------------------------
The total amount of investment in Phase I of the WEIHAI XXXXXXXXXX XX
is presently estimated to be US$1,140,000. The unit of currency for measuring,
among other things, the total amount of investment, registered capital and
capital contributions for purposes of this Contract and its Appendices and the
Articles of Association shall be US dollars.
Article 5.2 - Registered Capital
--------------------------------
The registered capital of WEIHAI BARRINGTON shall be equivalent to
US$800,000, of which Party A will contribute an amount equivalent to US$400,000,
accounting for fifty percent (50%) of the registered capital, and Party B will
contribute an amount equivalent to US$400,000, accounting for fifty percent
(50%) of the registered capital.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 8 of 32
Article 5.3 Payment of Capital Contributions
--------------------------------------------
5.3.1 Payment of registered capital contributions
(a) Party A shall pay its subscribed registered capital (1) in
cash in US dollars and/or Renminbi, (2) by transferring its interest in
workshops and ancillary buildings designated for use of WEIHAI BARRINGTON, land
use rights, assembling facilities and other facilities located on the WEIHAI
BARRINGTON site.
(b) Party B shall pay its subscribed registered capital (1) in
cash in US dollars, (2) by transferring equipment and raw materials.
5.3.2 The registered capital subscribed by the Parties shall be
paid as follows:
(a) no less than 15% of the Parties' respective subscribed
registered capital shall be paid within three (3) months after the later to
occur of the Business License Date or the date on which all conditions precedent
set forth in Article 5.5 have been satisfied; and
(b) the remaining registered capital subscribed by the Parties
shall be paid from time to time as decided by the Board. Subject to it not
exceeding one (1) year as of the Business License Date.
5.3.3 All registered capital contributions in cash shall be made,
if in RMB, to the RMB account of XXXXXX XXXXXXXXXX at XXXXXX XXXXXXXXXX's bank's
principal office in Weihai or at such other authorized bank as the Board may
from time to time designate or, if in foreign currency, to the respective
foreign exchange account of XXXXXX XXXXXXXXXX at XXXXXX XXXXXXXXXX's bank's
principal office in Weihai or at such other authorized bank as the Board may
from time to time designate.
Article 5.4 - Use of the Capital
---------------------------------
The payments, in cash or in kind, of the subscribed registered capital
by the Parties to XXXXXX XXXXXXXXXX as set forth in Article 5.3 above, shall be
for the exclusive use of XXXXXX XXXXXXXXXX for implementing the purposes of this
Contract.
Article 5.5 - Conditions Precedent
----------------------------------
Notwithstanding any other provision of this Contract to the contrary,
the Parties shall not be obligated to make any of their registered capital
contributions to WEIHAI BARRINGTON until and unless each of the following
conditions have been fulfilled or satisfaction of such conditions has been
waived in writing by the Parties:
(a) the business plan for the establishment of XXXXXX XXXXXXXXXX's business
has been mutually prepared and consented to by the Parties;
(b) this Contract and the Articles of Association of XXXXXX XXXXXXXXXX have
been duly approved by MOFTEC;
(c) a valid business license has been duly issued to XXXXXX XXXXXXXXXX by
the SAIC;
(d) all necessary approvals and licenses necessary for XXXXXX XXXXXXXXXX to
conduct its business as contemplated under Article 4 have been obtained and are
valid;
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 9 of 32
(e) Party A shall have obtained on behalf of XXXXXX XXXXXXXXXX an approval
from the relevant office of the SAEC, a Foreign Investment Enterprise Foreign
Exchange Registration Certificate and shall have opened a XXXXXX XXXXXXXXXX
foreign exchange bank account with an authorized bank;
(f) Party A shall have obtained from the relevant tax authority written
certification of the tax treatment of all profits generated by XXXXXX
XXXXXXXXXX.
(g) Party A shall have obtained from the relevant local, provincial and
central governmental authorities all licenses necessary to manufacture and
distribute the products of the Joint Venture within China, including the Medical
Device Manufacturing License, the Medical Device Registration License and the
Sanitary License.
(h) A distribution agreement and an operating agreement has been signed
between Party A and the Joint Venture under which Party A will
distribute the products of the Joint Venture in China and other
territories and the Joint Venture will distribute its products in
certain territories.
(i) Within 60 days of the Conditions Precedent stated in article 5.5 of
this agreement being fulfilled, Party B shall close down its
laboratory in Anshan City and shall refrain from all activity in the
diagnostic test business in China, except for that activity in which
party B is in co-operation with Party A.
Each of the documents and approvals listed above shall be satisfactory in form
and substance to each of the Parties.
Article 5.6 - Verification of Capital Contribution
--------------------------------------------------
The value of the capital contribution paid by each Party shall be
verified by Deloitte Touche Tohmatsu or another mutually acceptable accounting
firm. Upon receipt of such report(s), XXXXXX XXXXXXXXXX shall issue capital
contribution certificate(s) to such Party or Parties making the capital
contribution in the amount of the capital as so verified. Such capital
contribution certificate(s) shall record, inter alia, the name of XXXXXX
XXXXXXXXXX and the date of its establishment, the names of the Parties making
the payment of the capital contribution, the amount and date of such payment and
the date of the issuance of the capital contribution certificates. Capital
contribution certificate(s) shall be conclusive evidence of such Party's equity
investments in XXXXXX XXXXXXXXXX.
Article 5.7 - Funding
---------------------
5.7.1 XXXXXX XXXXXXXXXX shall have the power, so far as legally permitted,
to borrow local currency or foreign exchange funds, from sources inside or
outside the PRC, which it requires to support its needs and its operational and
production requirements and to mortgage any and all of its assets and assign any
and all of its rights under other agreements to which XXXXXX XXXXXXXXXX is a
party in order to obtain loans and other financing. XXXXXX XXXXXXXXXX shall have
the power to borrow such funds up to the maximum amount allowed by relevant
regulations or as otherwise approved by relevant authorities, including
financing in a sale/leaseback format. XXXXXX XXXXXXXXXX may obtain financing
with guarantees from the Parties or their Affiliates, in which case such
financing and/or guarantees shall be provided by the Parties or their
Affiliates. In the event that a Party agrees to lend funds to XXXXXX XXXXXXXXXX
or to guarantee a loan to XXXXXX XXXXXXXXXX from a third party or financial
institution, such Party shall be entitled to be paid interest and related fees
as if such Party (or Parties) were an independent third party and as if the
transaction were a negotiated, arm's length financing. The terms and conditions
applicable to such loans and/or guarantees shall be decided by the Board. The
amounts borrowed pursuant to this Article 5.7 shall be used to finance the
equipment and other facilities required by the Company, as well as XXXXXX
XXXXXXXXXX's day-to-day operations.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 10 of 32
CHAPTER 6. CHANGE AND TRANSFER OF REGISTERED CAPITAL
Article 6.1 - Increases of Registered Capital
---------------------------------------------
Should the Board deem it necessary to increase the total amount of
investment and the registered capital of XXXXXX XXXXXXXXXX, such increase shall
be authorized by the unanimous vote of all Directors, and approved by the
original Approving Authority.
No Party shall be required to make any additional capital contribution to
XXXXXX XXXXXXXXXX except as expressly set forth in this Contract.
Article 6.2 - Future Expansion
------------------------------
Depending upon the demand for XXXXXX XXXXXXXXXX'S products and
services and the development and operational circumstances of XXXXXX XXXXXXXXXX,
the Board may, by unanimous approval, decide to implement an expansion of its
business plan (`the Expansion') and to increase the investment in XXXXXX
XXXXXXXXXX. The Parties hereby agree that they will support a decision by the
Board to implement such an expansion. The Parties hereby consent and agree to an
increase in the registered capital and total investment of XXXXXX XXXXXXXXXX as
determined by the Board to be necessary for such an Expansion and agree to seek
the necessary approvals from the Approving Authority for those corresponding
increases. In the event the Board approves the Expansion but a Party is unable
or elects not to exercise its right of contribution in connection with an
increase in the registered capital of WEIHAI BARRINGTON to effect the Expansion,
then the other Parties shall have the immediate option to contribute to such
increase, thereby increasing their proportional share of the registered capital
in WEIHAI BARRINGTON.
Article 6.3 - Transfer of Capital
---------------------------------
6.3.1 Any Party may sell, assign or transfer (a "Transfer") all or any part
of its registered capital interest (an "equity interest") in XXXXXX XXXXXXXXXX,
subject to the other Parties' written consent to any such Transfer, the
unanimous affirmative vote of all Directors or the unanimous written consent of
all Directors, and the approval of the PRC original Approving Authority. Except
as otherwise set forth in Article 6.3.2, in the case of such Transfer by a Party
(the "Transferring Party") of all or any portion of its equity interests in
XXXXXX XXXXXXXXXX, the other Parties (the "Non-transferring Parties") shall have
a right of first refusal with respect to such interests to be transferred at the
price and on terms and conditions as set forth below. The Transferring Party who
intends to Transfer all or any portion of its equity interest in XXXXXX
XXXXXXXXXX shall notify the Non-transferring Parties in writing of such intent
(a "Notice of Transfer"), describing the portion of equity interest proposed to
be Transferred (the "Subject Interest"), the name or names of the proposed
transferee(s), if any, and the consideration proposed to be paid therefor (and,
to the extent the consideration does not consist of cash, the US dollar
equivalent thereof reasonably determined by an independent appraiser who is
acceptable to the Non-transferring Party) (the "Subject Consideration"). Such
Notice of Transfer shall constitute an option to the Non-transferring Parties to
purchase all, but not less than all, of the Subject Interest for the Subject
Consideration and on the terms and conditions as set forth in the Notice of
Transfer. The Non-transferring Parties may exercise the option by giving a
written notice of such exercise to the Transferring Party within ninety (90)
days after receipt of the Notice of Transfer. The notice of exercise shall set
forth a closing date, which may be any date from thirty (30) to sixty (60) days
after all relevant approvals to the Transfer have been obtained. If no notice of
exercise is given by the Non-transferring Parties within the ninety-day option
period, the Transferring Party may, only upon the consent of the other Parties,
following the expiration of such ninety-day option period (or such prior time as
the Non-transferring Parties shall have, in writing, advised the Transferring
Party of their election not to exercise the right of the first refusal),
transfer all (but not less than all) of the Subject Interest at no less than the
Subject Consideration and on the terms and conditions to the proposed
transferee(s) as provided in the Notice of Transfer. This Article 6.3 shall not
apply in the circumstances contemplated by Articles 16.2 or 17.8.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 11 of 32
6.3.2 Notwithstanding any other provision of this Contract, each Party
hereby gives consent to any Transfer by the other Parties of all or any of its
equity interest in WEIHAI BARRINGTON to an Affiliate of the Transferring Party
(a "Permitted Transfer"), and waives its preemptive right to purchase the other
Parties' interest which is transferred to such Affiliate. Such consent shall be
valid throughout the term of this Contract. The Transferring Party shall notify
the other Parties not less than thirty (30) days in advance of any such
Permitted Transfer, and each Party shall cause its appointed directors to the
Board to approve such Permitted Transfer and support the Transferring Party in
its application to the Approval Authority for approval of such Permitted
Transfer.
6.3.3 Any Transfer of any Party's equity interest under this Article shall
not become effective until all necessary approvals have been obtained.
6.3.4 Upon Transfer of the registered capital of a Party, XXXXXX XXXXXXXXXX
shall cancel the then outstanding capital contribution certificates of the
Transferring Party and issue new capital contribution certificates to the
transferee to reflect the new ownership interests (and if the Transferring Party
Transfers only a portion of its equity interest to the transferee, a new capital
contribution certificate shall also be issued to the Transferring Party
reflecting its remaining equity interest in WEIHAI BARRINGTON), and
simultaneously therewith the transferee shall execute an instrument pursuant to
which it shall become a party to and be bound by this Contract and the Articles
of Association, as amended as of such Transfer.
CHAPTER 7. RESPONSIBILITIES OF PARTIES TO XXXXXX XXXXXXXXXX
Article 7.1 - Responsibilities of the Parties
---------------------------------------------
7.1.1 In addition to its other obligations under this Contract, Party A
shall have the following specific responsibilities:
(a) upon consultation with and approval by the Other Parties,
preparing, submitting and monitoring all applications for, and assisting XXXXXX
XXXXXXXXXX in obtaining all required PRC national, provincial or municipal
approvals, permits, registrations, filings, and business, operating or other
licenses for the establishment of XXXXXX XXXXXXXXXX, and, thereafter, preparing,
submitting and monitoring all applications for, and assisting XXXXXX XXXXXXXXXX
in obtaining such other approvals, permits, registrations, filings and licenses
as are necessary or required for XXXXXX XXXXXXXXXX to successfully, timely and
efficiently operate the business contemplated hereby, and assisting XXXXXX
XXXXXXXXXX on an on-going basis with respect to any matters involving PRC,
Shandong and other provincial and Weihai and other municipal governmental
agencies;
(b) assisting XXXXXX XXXXXXXXXX in hiring qualified local Chinese
management and technical personnel, workers and other necessary employees at the
direction of the Board, and assisting XXXXXX XXXXXXXXXX with securing all
necessary personnel transfer or other approvals;
(c) making timely payment of its capital contribution as set forth in
Chapter 5 hereof;
(d) assisting XXXXXX XXXXXXXXXX in applying for and obtaining the
maximum benefit of all investment incentives and all permitted reductions in, or
exemptions from, PRC national, provincial and local income taxes, import duties,
value-added taxes, business taxes, consumption taxes, local surcharges and
taxes, real estate taxes, land costs, vehicle taxes, or other impositions or
fees, and obtaining any other tax reductions, rebates or exemptions to which
WEIHAI BARRINGTON is currently or may in the future become entitled;
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 10 of 32
(e) upon consultation with and approval by the Other Parties,
assisting XXXXXX XXXXXXXXXX in the preparation of any accounting statements or
reports, including, but not limited to, any balance sheets, statements or
reports required by any governmental authorities;
(f) assisting personnel furnished by or through Party B and Directors
nominated by Party B with PRC entry and exit formalities, including appropriate
visas, and with working permits, travel and accommodations in the PRC in
connection with the activities of XXXXXX XXXXXXXXXX;
(g) obtaining on behalf of XXXXXX XXXXXXXXXX an approval from the
relevant office of the State Administration of Exchange Control a Foreign
Investment Enterprise Foreign Exchange Registration Certificate, opening a
XXXXXX XXXXXXXXXX foreign exchange bank account with an authorized bank in the
PRC, and assisting XXXXXX XXXXXXXXXX in obtaining all requisite permits and
approvals to convert foreign currency, including the right to access any legal
foreign exchange forum and to convert RMB to US dollars in order to make debt
service payments and to distribute profits in foreign exchange to Parties B and
C;
(h) assisting the other Parties and the foreign personnel of XXXXXX
XXXXXXXXXX in repatriating their foreign exchange earnings derived under this
Contract back to their home country;
(i) assisting XXXXXX XXXXXXXXXX and Party B in the importation of
equipment and materials, in handling customs procedures and obtaining all
necessary import licenses or permits relating to the aforesaid imports, and
arranging the domestic transportation of the aforesaid imports after they are
shipped to the designated port in the PRC;
(j) assisting XXXXXX XXXXXXXXXX in arranging financing for the excess
of total amount of investment over the registered capital of XXXXXX XXXXXXXXXX.
(k) Providing architectural plans and drawings for any new facilities
to be constructed on behalf of the JV.
(l) Purchasing land for the JV's facilities, and obtaining all
necessary permits and approval documents for the use of the land by the JV, for
no less than the initial 20 year term of the JV contract.
(m) Selecting by competitive bid contractors to undertake the
construction of the JV's facilities, including all necessary infrastructure.
(n) Overseeing all phases of construction of the JV's new
facilities.
(o) Preparing an acceptable procedures manual for all products
of the JV destined for the US market, suitable for approval
by the FDA.
(p) Working with the US FDA to obtain approvals for facilities,
products and procedures of the JV, hiring qualified
personnel to undertake quality control for the JV, and
hiring and training qualified personnel to ensure that the
procedures are carried out effectively and satisfactorily.
(q) Selling the products of the JV in the Chinese market, per
the distribution agreement.
The reasonable out-of-pocket expenses incurred for items a through q
above shall be paid by XXXXXX XXXXXXXXXX upon approval by the Board.
7.1.2 In addition to its other obligations under this Contract, Party B
shall have the following specific responsibilities:
(a) assisting XXXXXX XXXXXXXXXX in arranging financing for the excess
of total amount of investment over the registered capital of XXXXXX XXXXXXXXXX;
(b) assisting with the design, implementation, and operation of the
businesses to be established and operated by XXXXXX XXXXXXXXXX;
(c) assisting with the preparation of requests for proposal and
selection of qualified bidders in connection with the equipment and technology
to be imported for XXXXXX XXXXXXXXXX;
(d) assisting XXXXXX XXXXXXXXXX in selecting qualified managerial and
technical personnel and workers;
(e) selecting and procuring on behalf of XXXXXX XXXXXXXXXX appropriate
materials, equipment and other supplies unavailable in the PRC, as set forth in
Chapter 10 of this Contract;
(f) making timely payment of its capital contribution as set forth in
Chapter 5 of this Contract;
(g) assisting with the process of obtaining FDA approval for the
facilities, products and processes of the JV;
(h) Assist in developing export markets for the JV's products,
(i) Organizing a corporate structure for the JV that will allow it to
accomplish the corporate objectives outlined herein, to enable it to accept
further injections of capital, debt and other forms of financing, and ultimately
position it to access both domestic and foreign capital markets.
(j) Ensuring that the legal structure of the JV is in accordance with
Chinese laws and regulations for Foreign Owned Enterprises, and in accordance
with such domestic and foreign regulations as may apply when the JV seeks
listings on domestic and/or foreign markets.
(k) Preparing the necessary documentation for the JV to operate
legally and successfully in China and overseas, and which will allow the company
to ultimately access domestic and foreign capital markets.
(l) Selecting and engaging banking institutions and investment banking
institutions to assist in the preparation of the JV for the capital markets.
(m) Selecting and engaging legal advisors, accountants, financial
advisors and such other advisors as may be required to accomplish the JV's
corporate purposes.
The reasonable out-of-pocket expenses incurred for items a through m
above shall be paid by XXXXXX XXXXXXXXXX upon unanimous approval by the Board.
7.1.3 Responsibilities of both of the Parties:
(a) employing their best efforts in good faith to (i) ensure the
economic viability and profitability of XXXXXX XXXXXXXXXX and (ii) protect each
other's technology, know-how and trade secrets from unauthorized disclosure;
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 14 of 32
(b) cooperating to achieve the purposes and goals of XXXXXX XXXXXXXXXX
as set forth herein and in the Appendix and Articles of Association by executing
all documents and taking all actions necessary or advisable to effect the
foregoing;
(c) ensuring that XXXXXX XXXXXXXXXX's books and records are kept in
accordance with the provisions of the Articles of Association;
(d) causing its nominees to the Board of XXXXXX XXXXXXXXXX to vote in
accordance with the terms of this Contract and its Appendix, and the Articles of
Association, and
(e) using its best efforts to carry out the intent of the agreements
contained herein.
(f) doing nothing against the interests of the other Parties, or the
successful continuation of the business.
CHAPTER 8. BOARD OF DIRECTORS
Article 8.1- Formation of the Board of Directors
------------------------------------------------
The Board, with its initial membership as defined in Appendix A to
this Contract, shall be established on the Business License Date and shall hold
its first meeting as soon as practicable thereafter.
Article 8.2 - Powers and Meeting of the Board
---------------------------------------------
The Board is the highest organ of authority of XXXXXX XXXXXXXXXX and
shall decide all major matters of XXXXXX XXXXXXXXXX. The powers and functions of
the Board, the procedures for the meetings of the Board and quorum required
therefor shall be set forth in the Articles of Association.
Article 8.3 - Appointment of Directors
--------------------------------------
8.3.1 The Board shall be comprised of five (5) Directors, of which two (2)
shall be appointed by Party A, and three (3) shall be appointed by Party B.
Party A shall designate one of its appointed Directors as the Chairman of the
Board and Party B shall designate one of its appointed Directors as the
Vice-Chairman of the Board. The Chairman and Vice Chairman shall each have one
vote as accorded to other Directors. Whenever the Chairman is unable to perform
his responsibilities for any reason, the Vice Chairman will represent him.
8.3.2 The Chairman of the Board is the legal representative of XXXXXX
XXXXXXXXXX and shall have the authority to act for XXXXXX XXXXXXXXXX as provided
by law, by this Contract and by the Articles of Association and as authorized
from time to time by the Board.
8.3.3 Each Director (including the Chairman and the Vice Chairman) shall be
appointed for a term of four (4) years, or until such person's earlier death or
resignation, and may serve consecutive terms if re-appointed by the Party making
the appointment.
8.3.4 Each Party shall have the sole right at any time to remove any
Director originally appointed by it, with or without cause, and to fill the
vacancy caused by such removal.
8.3.5 If a seat on the Board is vacated by the retirement, removal,
resignation, illness, disability or death of a Director, the Party that
originally appointed such Director shall appoint a successor to serve the
remainder of such Director's term.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 15 of 32
8.3.6 Upon consent of BOTH PARTIES, the Board may, from time to time invite
certain officers of XXXXXX XXXXXXXXXX to attend meetings of the Board.
Article 8.4 - Voting
--------------------
8.4.1 Major Issues, as defined below, shall require the unanimous
affirmative vote of all Directors or the unanimous written consent of all
Directors. Major Issues shall mean the following:
(a) Amendments to the Articles of Association;
(b) Termination or dissolution of XXXXXX XXXXXXXXXX (except for
termination or dissolution as provided in Chapters 16 and 17);
(c) Increase, reduction, or transfer of the registered capital of
XXXXXX XXXXXXXXXX (except for a transfer to an affiliate of a Party as provided
in Article 6.3.2 or a transfer as provided in Articles 16.2 or 17.8); and
(d) Merger, division, or change in the form of the organization of
XXXXXX XXXXXXXXXX or consolidation of XXXXXX XXXXXXXXXX with other economic
organizations; provided, however, that merger and consolidation of XXXXXX
XXXXXXXXXX shall not be interpreted to include an investment in another entity
by XXXXXX XXXXXXXXXX or the entering into a joint venture arrangement between
XXXXXX XXXXXXXXXX and another entity.
(e) Any issue with a financial impact to the JV (not including sales
or purchases of product or raw materials in the JV's regular course of business)
in excess of US $250,000.
8.4.2 Matters other than Major Issues may be decided by an affirmative vote
of a simple majority of the Board in attendance at a meeting at which a quorum
is present, provided that at least one representative of Party A and one
representative of Party B are in attendance at the meeting and votes
affirmatively on the matter.
8.4.3 Board resolutions may be passed without a meeting if in writing and
executed by all Directors. For this purpose, Directors may execute separate
counterparts of identical written resolutions which, taken together, shall
constitute one approved set of written resolutions. Such resolutions may be
executed and transmitted to BOTH PARTIES by facsimile.
Article 8.5 - Annual Operating Plans
------------------------------------
The Board shall approve an annual operating plan and budget for XXXXXX
XXXXXXXXXX (the "Annual Plan") for the following fiscal year no later than
November 30 of the present fiscal year. In connection therewith, the General
Manager shall draft an annual operating plan and budget for XXXXXX XXXXXXXXXX
(the "Draft Annual Plan") by no later than September 30 of each fiscal year.
Copies of the Draft Annual Plan shall be provided to The Parties for their
review and comments and to the Chairman and Vice Chairman of XXXXXX XXXXXXXXXX
for their review and comments. The Draft Annual Plan and the comments of The
Parties, the Chairman and the Vice Chairman shall then be submitted to the Board
by no later than October 31 of each fiscal year for review, investigation,
consultation, modification and approval of a final form of Annual Plan for the
following fiscal year. The Annual Plan must be approved by unanimous vote of the
Board. The Annual Plan shall be implemented by the General Manager of XXXXXX
XXXXXXXXXX. The General Manager's authority to incur indebtedness and
contractual liabilities on behalf of XXXXXX XXXXXXXXXX and to make expenditures
is limited in accordance with the terms of the Annual Plan unless otherwise
decided by the Board.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 16 of 32
CHAPTER 9. MANAGEMENT
Article 9.1 - Management Organization
-------------------------------------
9.1.1 XXXXXX XXXXXXXXXX shall have one (1) General Manager and one (1)
Deputy General Manager. All other management personnel shall be appointed by the
General Manager.
9.1.2 Without limiting the authority of the Board to remove the General
Manager, the Deputy General Manager or other management personnel, the Board
shall have the authority to dismiss at any time the General Manager, the Deputy
General Manager or any of the management personnel in the event that the Board
determines that the General Manager, the Deputy General Manager or any of the
management personnel have engaged in any fraudulent acts, graft or have grossly
neglected their duties. In such event, the General Manager, the Deputy General
Manager or the member of the management personnel, as the case may be, shall be
personally liable for any financial losses incurred by their fraudulent act or
gross neglect of duties.
Article 9.2 - General Manager and Deputy General Manager
--------------------------------------------------------
The General Manager will be nominated by Party A, and the Deputy
General Manager will be nominated by Party B. Each of the management officers so
nominated shall be subject to the approval of and appointment by the Board. The
General Manager and the Deputy General Manager shall be appointed for a term of
two (2) years or such other term as determined by the Board, or until such
person's earlier death, resignation or removal. The General Manager and the
Deputy General Manager may be re-appointed to successive terms. If the General
Manager or the Deputy General Manager is removed, a successor shall be nominated
and appointed in the same manner as the original appointment.
Article 9.3 - Responsibilities of the General Manager and the Deputy General
----------------------------------------------------------------------------
Manager
-------
9.3.1 The responsibilities of the General Manager are to implement the
resolutions of the Board and manage the day-to-day operation of XXXXXX
XXXXXXXXXX. The General Manager shall report to and be responsible to the Board.
9.3.2 The Deputy General Manager shall assist the General Manager in
fulfilling his duties and shall report directly to the General Manager.
9.3.3 The General Manager and the Deputy General Manager shall perform
their duties on a full time basis. The General Manager and the Deputy General
Manager shall not hold posts concurrently with other enterprises, except if such
enterprise is an affiliate of a Party or if the Board has given its specific
written consent.
CHAPTER 10. PROCUREMENT
Article 10.1 - Principles of Procurement
----------------------------------------
In procuring components, machinery, equipment, and other supplies and services
required for XXXXXX XXXXXXXXXX's activities, XXXXXX XXXXXXXXXX shall give
priority to PRC domestic sources whenever items from such sources are
competitive with like imported items with respect to quality, specifications,
performance, price, delivery time and other material terms. Except as otherwise
required by the Joint Venture Law, materials, equipment and services purchased
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 17 of 32
by XXXXXX XXXXXXXXXX within the PRC shall be purchased, as to those items
determined by the Board, through competitive bidding, and as to other items at
prices no higher than those charged to Chinese enterprises for purchases of
similar items and shall be paid in RMB. If any of the aforesaid items are not
competitive in the manner indicated in the first sentence, or cannot be procured
from the domestic market, or if Party B is able to offer significant economic or
quality advantages to XXXXXX XXXXXXXXXX in procurement, then XXXXXX XXXXXXXXXX
shall appoint Party B or one of its Affiliates, as its purchasing agent, to
procure such materials, equipment and services outside the PRC.
CHAPTER 11. LABOR
Article 11.1 - Staff and Workers
--------------------------------
11.1.1 The recruitment, employment, dismissal, resignation, salary, labor
insurance, welfare, bonuses, labor discipline, retirement insurance, and other
matters concerning the staff and workers of XXXXXX XXXXXXXXXX shall be provided
in the employment contract(s) to be signed according to the internal labor rules
formulated by the Board in accordance with relevant laws and regulations. XXXXXX
XXXXXXXXXX shall have the right of autonomy with regard to its personnel
management, production and operation, as provided in the relevant PRC laws and
regulations. The staff and workers of XXXXXX XXXXXXXXXX shall have the right to
establish a labor union in accordance with the relevant PRC laws and
regulations. Labor contracts may be signed between XXXXXX XXXXXXXXXX and each
individual employee directly or through a trade union collectively. Labor plans,
as amended from time to time by XXXXXX XXXXXXXXXX, and labor contracts so signed
shall be filed with the Labor Bureau and Personnel Bureau for reference only.
11.1.2 In compliance with relevant PRC national, provincial and local laws,
rules and regulations, and subject to the overall supervision of the Board or as
otherwise provided in Article 11.2, the total number, hiring, compensation,
qualifications, tenure and working hours of the employees of XXXXXX XXXXXXXXXX
shall be decided by the General Manager. Changes in the qualifications and
number of employees shall be determined in accordance with the operating needs
of XXXXXX XXXXXXXXXX. All employees hired by XXXXXX XXXXXXXXXX shall be subject
to a three-month probationary period of employment before they will be
officially considered employees of XXXXXX XXXXXXXXXX.
Article 11.2 - Management Officers and Expatriate Employees
-----------------------------------------------------------
The compensation and benefits of the executive management officers and
expatriate employees of XXXXXX XXXXXXXXXX shall be decided by the Board and
shall be in compliance with the relevant PRC national, provincial and local
laws, rules and regulations. Locally hired management personnel shall receive
locally competitive compensation. Expatriate personnel shall receive
compensation that is commensurate with that commonly provided to expatriate
personnel of similar qualifications and experience by foreign investment
enterprises of a similar nature located in major cities in the PRC.
Article 11.3 - Organization, Operation and Funding of Trade Union
-----------------------------------------------------------------
11.3.1 According to the stipulations of the "Trade Union Act of the People's
Republic of China", employees of XXXXXX XXXXXXXXXX have the right to organize a
trade union and take part in its activities.
11.3.2 The Trade Union of XXXXXX XXXXXXXXXX represents the legal interests of
the workers. Its tasks are as follows:
a) Support legal democratic rights and material interests of the workers;
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 18 of 32
b) Assist the Company in the rational use of welfare and reward funds;
c) Organize the workers to study science and technology;
d) Organize sports and recreational activities;
e) Educate the workers to observe labor discipline and utilize their best
efforts to fulfill their tasks.
11.3.3 The trade union leaders of XXXXXX XXXXXXXXXX, at the invitation of the
Board of Directors, can attend relevant meetings and reflect workers' opinions
and rational demands.
11.3.4 The trade union of XXXXXX XXXXXXXXXX shall take part in mediations in
solving discrepancies and disputes between the workers and XXXXXX XXXXXXXXXX.
11.3.5 XXXXXX XXXXXXXXXX shall contribute a sum equal to 2% of the total amount
of the workers' salaries per month as trade union fees. The trade union shall
use the fees according to the "Management of Methods of Trade Union Fees" as
stipulated by the General Trade Union of China.
CHAPTER 12. TAX, ACCOUNTING AND AUDIT
Article 12.1 - Accounting and Audit
-----------------------------------
XXXXXX XXXXXXXXXX may employ at XXXXXX XXXXXXXXXX's expense, one or
more accountants, including certified public accountants from an internationally
recognized firm of accountants. XXXXXX XXXXXXXXXX's accounting books and records
shall be maintained in accordance with the "PRC Accounting System for Foreign
Investment Enterprises" promulgated on June 23, 1992, other relevant promulgated
and publicly available PRC laws and regulations, and in an internationally
accepted accounting format, such as US GAAP, Hong Kong GAAP or International
Accounting Standards.
Article 12.2 - Fiscal Year
--------------------------
The fiscal year of XXXXXX XXXXXXXXXX shall commence on January 1,
except that the first fiscal year of XXXXXX XXXXXXXXXX shall commence on the
Business License Date and end on December 31 of the same year.
Article 12.3 - Bookkeeping Language
-----------------------------------
All vouchers, accounting books, statistical data and reports of XXXXXX
XXXXXXXXXX shall be kept in the Chinese language; provided, however, that all
monthly, semi-annual and annual financial statements shall also be prepared and
kept in the English language.
Article 12.4 - Bookkeeping Base Currency
----------------------------------------
All of XXXXXX XXXXXXXXXX's accounting books shall be maintained and
kept in RMB, but XXXXXX XXXXXXXXXX may also adopt United States Dollars or
foreign currencies as supplementary bookkeeping currencies.
Article 12.5 - Accounts
-----------------------
XXXXXX XXXXXXXXXX shall open a foreign exchange account and a RMB
account at the Bank of China, Weihai Branch, or at such other authorized bank or
place in the PRC as may be designated from time to time by the Board.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 19 of 32
Article 12.6 - Financial Statements
-----------------------------------
WEIHAI BARRINGTON shall provide monthly, semi-annual and annual
financial statements including balance sheets, profit and loss statements, cash
flow statements and currency balance sheets to each of the Parties and to the
Board no later than thirty (30) days for monthly statements and sixty (60) days
for semi-annual and annual statements after the close of the accounting period.
Article 12.7 - Annual Financial Accounting
------------------------------------------
Within sixty (60) days after completion of a fiscal year, the General
Manager shall have the annual financial statements prepared, including the
previous fiscal year's balance sheet, profit and loss statements, cash flow
statements, currency balance sheets and profit distribution, for delivery to the
Board for approval.
Article 12.8 - Financial Auditing
---------------------------------
XXXXXX XXXXXXXXXX's annual financial statements shall be audited
within ninety (90) days after the close of the fiscal year by the PRC registered
affiliate of one of the "Big 5" internationally recognized accounting firms, or
by a Chinese accounting firm unanimously approved by the Board of Directors of
XXXXXX XXXXXXXXXX. As of the date of this Contract, such registered affiliates
include: (1) Xxxxxx Xxxxxxxx, (2) PriceWaterhouseCoopers, (3) Deloitte Touche
Tohmatsu, (4) Xxxxx & Xxxxx, (5) KPMG Peat Marwick. The Parties agree that the
accountant shall be selected by the Board. If any Party considers the auditing
results inconsistent with the facts and wishes to retain an alternative auditor
of its own choice to audit XXXXXX XXXXXXXXXX's financial statements, such Party
may retain an alternative auditor, at its own expense, to audit XXXXXX
XXXXXXXXXX's financial statements, and the other Party and XXXXXX XXXXXXXXXX
shall support and cooperate with such auditor.
Article 12.9 - Taxation
-----------------------
12.9.1 XXXXXX XXXXXXXXXX shall pay, out of its taxable income, the
applicable national, provincial, and local income taxes according to the "PRC
Income Tax Law on Enterprises with Foreign Investment and Foreign Enterprises"
promulgated on April 9, 1991 and its Implementing Regulations (collectively, the
"FIE Tax Law"), and other applicable taxes including value-added tax, business
tax and consumption tax according to the relevant promulgated and publicly
available laws and regulations.
12.9.2 XXXXXX XXXXXXXXXX shall enjoy the most favorable tax treatment
permitted by PRC law. With the assistance of Party A, XXXXXX XXXXXXXXXX shall
make all efforts necessary or advisable to obtain all possible PRC or local tax
exemptions, preferences or reductions to which it may now be or hereinafter
become entitled. All PRC taxes, duties, late charges, penalties and related tax
liabilities of XXXXXX XXXXXXXXXX shall be calculated and paid in RMB.
Article 12.10 - The Three Funds
-------------------------------
12.10.1 XXXXXX XXXXXXXXXX shall, after payment of all applicable PRC taxes,
establish and maintain a reserve fund, an expansion fund, and an employee bonus
and welfare fund (the "Three Funds") in accordance with relevant provisions of
the Cooperative Enterprise Law. The percentage of revenues to be allocated to
each of such funds shall be determined by the Board according to the operation
and development of XXXXXX XXXXXXXXXX, but the amount allocated to the Three
Funds in any years shall not lower than the limitation required by the PRC laws.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 20 of 32
12.10.2 Other than the Three Funds, XXXXXX XXXXXXXXXX shall be exempt from
all other subsidies which the State may pay to the staff and workers at
State-owned enterprises and all social charges.
Article 12.11 - Depreciation
----------------------------
The depreciation period for the fixed assets of XXXXXX XXXXXXXXXX
shall be decided by the Board in accordance with the "Implementing Rules of the
Income Tax Law of the People's Republic of China for Foreign Invested
Enterprises and Foreign Enterprises", as amended on June 30, 1991, other
relevant promulgated and publicly available PRC laws and regulations.
Article 12.12 - Customs Duties
------------------------------
Party A shall use its best efforts to assist XXXXXX XXXXXXXXXX in
obtaining all PRC import licenses and approvals from the PRC Customs at the most
favorable duty rates permissible for the import of equipment, machinery and raw
materials purchased by XXXXXX XXXXXXXXXX or imported in connection with the
operation of XXXXXX XXXXXXXXXX.
CHAPTER 13. EARNING FOREIGN EXCHANGE
Article 13.1 - Currency to be Received
--------------------------------------
XXXXXX XXXXXXXXXX's domestic sales will be in RMB or, if permissible
under relevant laws and regulations, for foreign exchange or both, at the option
of XXXXXX XXXXXXXXXX.
XXXXXX XXXXXXXXXX anticipates that up to 70% of its production will be
exported, and the remaining 30% or more will be sold on the domestic market.
XXXXXX XXXXXXXXXX may establish branches, sales offices, joint
ventures, distributorships, and/or agencies in China and abroad for the purpose
of selling its manufacturing output.
Article 13.2 - Earning Foreign Exchange
---------------------------------------
13.2.1 Matters concerning foreign exchange shall be handled in accordance
with relevant PRC laws and regulations concerning foreign exchange control.
Pursuant to the relevant tax laws and regulations of the PRC, Party B may freely
remit its profits to its overseas accounts and shall be exempted from
withholding taxes on such remittances.
13.2.2 The Parties acknowledge that the SAEC's confirmation that XXXXXX
XXXXXXXXXX can receive foreign exchange, obtain a Foreign Investment Enterprise
Foreign Exchange Registration Certificate, maintain a foreign exchange bank
account and have access to Foreign Exchange Adjustment Centers and designated
foreign exchange banks during the term of XXXXXX XXXXXXXXXX as necessary is an
essential and decisive condition to the success of XXXXXX XXXXXXXXXX. Party A
shall assist XXXXXX XXXXXXXXXX in obtaining such confirmation, certificates, and
annual renewal and access to Foreign Exchange Adjustment Centers and designated
foreign exchange banks.
13.2.3 In accordance with the relevant PRC laws and regulations in effect
from time to time, XXXXXX XXXXXXXXXX shall endeavor to maintain a balance in its
foreign exchange receipts and expenditures. XXXXXX XXXXXXXXXX may adopt measures
permitted under PRC laws and regulations to generate or obtain foreign exchange
including, without limitation, the following:
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 21 of 32
(a) conversion of RMB into US dollars at a Foreign Exchange Adjustment
Center or designated foreign exchange bank at the then current rate prevailing,
with the service charges at such Adjustment Center or designated foreign
exchange bank to be borne by XXXXXX XXXXXXXXXX;
(b) adjustment of foreign exchange and RMB between XXXXXX XXXXXXXXXX
and any other enterprise in the PRC with foreign investment;
(c) reinvestment by the Parties of their RMB profits in Chinese
domestic enterprises capable of generating foreign exchange or increasing their
foreign exchange revenues; and
(d) such other methods as are currently permitted or are allowed in
the future by applicable laws and regulations in effect from time to time.
Party A shall assist XXXXXX XXXXXXXXXX in its attempts to adopt measures to
generate foreign exchange, including identifying opportunities for obtaining
foreign exchange and assisting with relevant approvals.
13.2.4 XXXXXX XXXXXXXXXX's foreign exchange expenditures include, among
others, principal and interest on foreign currency loans to XXXXXX XXXXXXXXXX;
leasing and purchasing of imported materials and equipment which are not
available in the PRC of equal quality or specifications and on competitive
terms; dividends; payments for foreign employees; and any other foreign currency
obligations incurred by XXXXXX XXXXXXXXXX. No Party shall be required to make
any foreign currency available to XXXXXX XXXXXXXXXX if methods for generating or
obtaining foreign currency as set forth in this Chapter 13 are insufficient to
pay for the foreign exchange expenditures of XXXXXX XXXXXXXXXX.
CHAPTER 14. REIMBURSEMENT FEES, DISTRIBUTIONS AND REMITTANCES
Article 14.1 - Reimbursement Fees
---------------------------------
Upon approval by the Board of Directors, XXXXXX XXXXXXXXXX shall
reimburse the Parties' direct expenses incurred prior to the Business License
Date in performing specified and agreed upon support services for XXXXXX
XXXXXXXXXX.
Article 14.2 - Distribution of Profits
--------------------------------------
A hundred percent (100%) of the net profits of XXXXXX XXXXXXXXXX
remaining after allocation for payment of taxes pursuant to the tax laws of the
PRC and after deductions for the Three Funds set forth in Article 12.10 and for
trade union fees under Article 11.3.5 above, must be distributed among the
Parties in proportion to their percentage of ownership of the capital shares of
XXXXXX XXXXXXXXXX, unless the Board unanimously votes to reduce said percentage
of distribution.
Article 14.3 - Previous Loss and Retained Profit
------------------------------------------------
XXXXXX XXXXXXXXXX shall not distribute any net profits unless the
losses of previous years have been made up. Retained profits from previous
years may be distributed together with those of the current year, at the
discretion of the Board.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 22 of 32
Article 14.4 - Remittances
--------------------------
14.4.1 All remittances of profits and other remittances out of the PRC to
any Non-Chinese Party shall be made to a designated foreign bank account in
United States Dollars or other freely convertible foreign currencies as
designated by the Non-Chinese Party separately in accordance with the foreign
exchange regulations of the PRC.
14.1.2 If the profit distributed to any non-Chinese Party in any year is in
RMB, then said Party, at its option, can apply for approval from the State
Administration for Exchange Control to convert such RMB profits into foreign
exchange or can require WEIHAI BARRINGTON to open a separate RMB bank account
for such RMB profits and hold the same together with any interest accrued until
such time as XXXXXX XXXXXXXXXX shall have sufficient foreign exchange to convert
the RMB into foreign exchange and remit the earnings or profit together with any
interest accrued to said Party pursuant to Article 14.4.1 above.
CHAPTER 15. DURATION OF XXXXXX XXXXXXXXXX
Article 15.1 - Duration
-----------------------
15.1.1 The duration of XXXXXX XXXXXXXXXX shall be twenty (20) years
commencing on the Business License Date, unless earlier terminated as provided
in Articles 17 or extended as set forth in Article 15.1.2 below.
15.1.2 If the Parties agree to extend the duration of XXXXXX XXXXXXXXXX,
they shall jointly file an application to extend the duration signed by
representatives authorized by the Parties with the original PRC Approving
Authority at least six (6) months before expiration of the term of XXXXXX
XXXXXXXXXX. Upon approval of such application, XXXXXX XXXXXXXXXX shall institute
registration formalities to effect such extension according to the "PRC
Administrative Regulation Governing the Registration of Legal Corporations" or
equivalent regulation in effect at such time.
CHAPTER 16. ADDITIONAL CONDITIONS FOR TERMINATION AND/OR
DISSOLUTION AND LIABILITIES FOR BREACH OF CONTRACT
Article 16.1 - Termination
--------------------------
In addition to any other events of termination provided for elsewhere
in this Contract, if any of the following conditions arise, this Contract and
XXXXXX XXXXXXXXXX may be terminated and/or dissolved prior to the expiration of
the term of XXXXXX XXXXXXXXXX as set forth below:
16.1.1 If XXXXXX XXXXXXXXXX has been suffering losses and the Board of
Directors decide by unanimous vote or by unanimous written consent that XXXXXX
XXXXXXXXXX is likely to continue to suffer losses from which it cannot
financially recover, any of the Parties may terminate this Contract and dissolve
XXXXXX XXXXXXXXXX;
16.1.2 Upon the expropriation or confiscation of material and substantial
properties or assets of XXXXXX XXXXXXXXXX by action of any government, any of
the Parties may terminate the JV Contract and dissolve XXXXXX XXXXXXXXXX;
16.1.3 If a Party cannot perform its obligations under this Contract due to
Force Majeure, as defined in Chapter 19, and such condition extends continuously
for a period exceeding six (6) months after written notice of such condition is
received from the affected Party, the other Parties may terminate this Contract
and dissolve XXXXXX XXXXXXXXXX; or upon the occurrence of a Force Majeure as
determined by the Board, if the Board of Directors unanimously decide by
resolution that such occurrence shall materially adversely affect the business
prospects of XXXXXX XXXXXXXXXX and such effect cannot be adequately mitigated,
then any Party may terminate this Contract and dissolve XXXXXX XXXXXXXXXX;
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 23 of 32
16.1.4 If all necessary approvals, licenses or permits required in
connection with the establishment of XXXXXX XXXXXXXXXX, the implementation of
this Contract and the conduct and operation of XXXXXX XXXXXXXXXX's business as
contemplated herein are not received in a timely manner, or are subsequently
suspended or revoked for any reason, Any Party may terminate this Contract and
dissolve XXXXXX XXXXXXXXXX;
16.1.5 If any Party or its creditors or any other eligible party shall file
for the Party's dissolution, liquidation, bankruptcy, re-organization, or if the
creditors of that Party have taken over its management, or if any material or
significant part of that Party's undertaking, property or assets shall be
expropriated or confiscated by action of any government, or if for any reason
any Party is or becomes unable to meet its commitments to XXXXXX XXXXXXXXXX, the
other Parties by unanimous consent may terminate this Contract and dissolve
XXXXXX XXXXXXXXXX;
16.1.6 If any Party materially breaches any provision or term of this
Contract and its Appendices and fails to remedy such breach within one hundred
eighty (180) days from receipt of written notice of such breach, either of the
non-breaching Parties (in the case of this Contract and its Appendices) may
terminate this Contract and dissolve XXXXXX XXXXXXXXXX;
16.1.7 If any Party fails to pay any of its subscribed registered capital
in the form and condition and at the time as set forth in Articles 5.2 and 5.3
of this Contract, then, unless otherwise agreed between the Parties, such Party
shall pay an additional amount to XXXXXX XXXXXXXXXX as liquidated damages, which
shall be two percent (2%) per month on the value of the unpaid capital at the
due date under this Contract. If the default continues for three (3) months or
more, the non-defaulting parties shall have the right to purchase, at their
discretion, all or part of such share which has been subscribed but not paid by
the defaulting Party or the non-defaulting Parties may terminate this Contract
and dissolve XXXXXX XXXXXXXXXX;
16.1.8 If any of the conditions precedent to the obligation to pay the
subscribed registered capital as set forth in Article 5.5 of this Contract are
not fulfilled within 30 days after the Business License Date, and the Parties do
not agree in writing to waive such conditions precedent or extend the time for
their fulfillment, Any Party shall have the right to terminate this Contract and
dissolve XXXXXX XXXXXXXXXX; and
16.1.9 Termination of this Contract and XXXXXX XXXXXXXXXX under any of the
conditions as set forth in Chapters 16 or 17 shall require one (1) month's prior
written notice from the Party requesting such termination and approval of the
original Approving Authority.
Article 16.2 - Consequences of Termination Due to Breach
--------------------------------------------------------
If this Contract is terminated due to breach or other events as set
forth in Articles 16.1.4, 16.1.5, 16.1.6, 16.1.7 or 16.1.8, the Party having
such right to terminate (the "non-breaching Party") shall, at its option, have
the following remedies in addition to all remedies otherwise available under
this Contract and applicable law, notwithstanding anything herein to the
contrary:
(a) to require the breaching Party, by written notice sent within
thirty (30) days after the date of Contract termination or within sixty (60)
days after completion of an appraisal of fair market value and determination of
book value as provided herein, to sell to the non-breaching Parties or its
designees all of the breaching Party's interests in XXXXXX XXXXXXXXXX at the
then book value of such interests in XXXXXX XXXXXXXXXX to be determined in
accordance with US GAAP, or its fair market value as evaluated by an
internationally recognized appraiser acceptable to the non-breaching Party,
whichever is lower, and to apply for conversion to a wholly foreign-owned
enterprise, in the case where Party A is the breaching Party, or conversion to a
limited liability company, in the case where Party A is the non-breaching Party,
or liquidation of XXXXXX XXXXXXXXXX, at the election of the non-breaching Party;
and
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 24 of 32
(b) to require the breaching Party to pay damages to the non-breaching
Party, which shall be measured by the loss to the non-breaching Party, including
lost profits of XXXXXX XXXXXXXXXX, and to include the reasonable attorney's
fees, which shall be limited to 15% of the damages awarded, and other expenses
incurred in connection with such breach.
CHAPTER 17. PROCEDURES UPON TERMINATION OR LIQUIDATION
Article 17.1 - Liquidation Committee
------------------------------------
17.1.1 Upon termination of XXXXXX XXXXXXXXXX and this Contract, the Board
shall function as a Liquidation Committee to liquidate WEIHAI BARRINGTON. As
used in this Contract, "termination" shall include termination by express
agreement of the Parties, termination under the conditions as set forth in
Chapters 16 and 17 of this Contract, or as otherwise expressly provided
elsewhere in this Contract. Upon termination, certain rights to acquire
interests in XXXXXX XXXXXXXXXX shall arise either pursuant to Article 16.2 or
Article 17.9, and where interests in XXXXXX XXXXXXXXXX are not acquired pursuant
to Article 16.2 or Article 17.9, the Liquidation Committee shall establish
procedures for liquidating the assets and liabilities of XXXXXX XXXXXXXXXX as
described below.
17.1.2 BOTH PARTIES shall cooperate in obtaining the required PRC
government approvals to implement the termination of XXXXXX XXXXXXXXXX as set
forth herein.
17.1.3 All provisions in this Contract and in the Articles of Association
concerning the Board shall similarly apply to the Liquidation Committee. Without
limitation, the voting requirements set forth in Article 8.4 of this Contract
shall also apply to the Liquidation Committee.
Article 17.2 - Inventory of Assets
----------------------------------
The Liquidation Committee shall make an inventory of all of XXXXXX
XXXXXXXXXX's assets; prepare detailed lists of assets and liabilities; propose
liquidation procedures and settlement schedules; and supervise the
implementation thereof. In developing and executing a liquidation plan, the
Liquidation Committee shall use every effort to obtain the highest possible
price for XXXXXX XXXXXXXXXX's assets.
Article 17.3 - Legal Actions
----------------------------
During the liquidation process, the Liquidation Committee shall
represent XXXXXX XXXXXXXXXX in bringing or defending any legal actions in
connection with XXXXXX XXXXXXXXXX and this Contract.
Article 17.4 - Priority
-----------------------
The expenses of the Liquidation Committee shall be paid with first
priority from the remaining assets of XXXXXX XXXXXXXXXX, prior to the payment of
any other expenses.
Article 17.5 - XXXXXX XXXXXXXXXX Residual Assets
------------------------------------------------
17.5.1 After the Liquidation Committee has paid or otherwise provided for
the payment of all the legitimate debts and liabilities of XXXXXX XXXXXXXXXX and
paid or provided for the payment of the liquidation expenses, the remaining
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 25 of 32
assets of XXXXXX XXXXXXXXXX, shall be distributed to the Parties valued at their
respective fair market value, on a pro rata basis according to the proportion of
registered capital of XXXXXX XXXXXXXXXX contributed by the respective Parties.
As between the Parties, Party A agrees that Party B shall have the first
priority with respect to any remaining foreign exchange assets of XXXXXX
XXXXXXXXXX to the extent of its prevailing percentage share of profits. The
liquidation plan shall provide that both Parties will have the right to purchase
any of XXXXXX XXXXXXXXXX's machinery, equipment and other facilities acquired by
XXXXXX XXXXXXXXXX after the Business License Date. In the event the Parties
offer the same terms and conditions for any such purchases, Party A shall have
priority.
17.5.2 To the extent any of the amounts distributed to the Foreign Parties
are distributed in RMB, Party A agrees that it will:
(a) assist the Foreign Parties in exchanging RMB for foreign currency
at the most favorable rate possible in the PRC; and/or
(b) assist the Foreign Parties in obtaining approval from the relevant
PRC government authorities and purchasing in RMB, at the most favorable prices
possible, products acceptable to the Foreign Parties which the Foreign Parties
shall be free to export from the PRC.
Article 17.6 - Public Announcement
----------------------------------
Upon completion of the liquidation, XXXXXX XXXXXXXXXX shall present a
report to the original PRC Approving Authority or their successors, complete the
formalities for canceling XXXXXX XXXXXXXXXX's registration at the Weihai
Municipal Administration of Industry and Commerce, surrender its business
license and, at that time, make a public announcement of its liquidation,
termination and winding-up. The announcement should be published three(3) times
constantly on the newspaper not lower than provincial grade.
Article 17.7 - Records
----------------------
After XXXXXX XXXXXXXXXX has ceased doing business, all records shall
be kept by Party A. And copies will be provided to the other parties upon
request.
Article 17.8 - Retained Rights
------------------------------
Termination of this Contract shall not prejudice the accrued rights
and liabilities of the Parties at the date of termination, unless otherwise
waived in writing by such Party or Parties, as the case may be.
Article 17.9 - Purchase of XXXXXX XXXXXXXXXX Interests Upon Termination
-----------------------------------------------------------------------
17.9.1 If upon termination of this Contract and the terms of Article 16.2
are not otherwise applicable, any Party wishes to purchase from the other
Parties the equity interests in WEIHAI BARRINGTON it does not already own, such
Party shall notify the other Parties of such intention. The fair-market price of
such equity interests in XXXXXX XXXXXXXXXX shall be determined by an
internationally recognized appraisal or merchant banking firm chosen by the
Liquidation Committee, the calculation of which price shall be substantiated in
a written report. In any such case, the price for which such interests may be
sold shall not be less than the value determined by such firm, unless otherwise
agreed by the Parties.
17.9.2 If upon termination of this Contract, no Party has elected to
exercise its rights under Article 17.9.1 to purchase from the other Parties the
equity interests in WEIHAI BARRINGTON it does not already own (and Article 16.2
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 26 of 32
is not otherwise applicable), assuming the Liquidation Committee decides to
conduct a public auction or a private sale of XXXXXX XXXXXXXXXX, such sale shall
be effected in accordance with the terms and procedures set by the Liquidation
Committee for such public auction or private sale, provided that any Party may
participate in such auction or private sale if the minimum price paid by such
Party is no less than the value determined by the appraisal or merchant banking
firm as set forth in Article 17.9.1.
Article 17.10 - Liquidation Under Certain Circumstances
-------------------------------------------------------
Notwithstanding the foregoing provisions of this Chapter, in case this
Contract is terminated prior to its expiration by reason of Articles 16.1.1,
16.1.2, or 16.1.3, where no Party or third party purchases the Equity Interests
of the other Party, or all Equity Interests in US CHINA MEDICAL pursuant to this
Contract are terminated prior to its expiration by reason of Articles 16.1.4,
16.1.5, 16.1.6, 16.1.7 or 16.1.8, and the non-breaching Parties do not elect to
acquire the breaching Party's interest pursuant to Article 16.2(a), each of the
Parties, after ensuring the US China Medical pay up all its liabilities and
expenses, shall cooperate and shall cause US CHINA MEDICAL to promptly return to
each Party its capital contributions in the form, currency and amount
contributed to US CHINA MEDICAL by such Party, to the extent contributions are
available, and as to a breaching Party pursuant to Article 16.2, only after
payment of all damages to the non-breaching Parties pursuant to Article 16.2(b).
All remaining assets shall be distributed to the Parties on a pro rata basis
according to Article 14.2 hereof. The Parties each guarantee, and the
Liquidation Committee is bound to effect, that any remaining foreign exchange
balance of US CHINA MEDICAL upon its liquidation or dissolution shall be first
applied to the settlement of Party B's pro rata share of the remaining assets.
CHAPTER 18. INSURANCE
The Parties shall cause XXXXXX XXXXXXXXXX to be covered, at XXXXXX
XXXXXXXXXX's expense, by appropriate insurance policies underwritten by the
People's Insurance Company of China or any other registered insurance company
authorized to provide the relevant insurance in the PRC on the basis of the most
competitive price, coverage and other relevant terms, provided, however, that
such policies shall be competitive internationally with respect to premiums,
coverage, and service as determined and agreed to by the Board.
CHAPTER 19. FORCE MAJEURE
Article 19.1 - Force Majeure
----------------------------
19.1.1 "Force Majeure" shall mean any of the following: acts by government
or public agency, riot, war, hostility, strikes, epidemics, fire, flood,
earthquake, storm, tidal wave or other acts of nature, and all other events
beyond the control of the Parties or XXXXXX XXXXXXXXXX which are not
foreseeable, or, if foreseeable, are unavoidable.
19.1.2 If one Party has been prevented from performing its responsibilities
stipulated in this Contract because of an event of Force Majeure, it shall
notify the other Parties in writing within fourteen (14) days after the
occurrence of such Force Majeure and shall act to mitigate damages. If an event
of Force Majeure occurs, no Party shall be liable for any damage, increased
costs or losses that another Party may sustain by reason of such failure or
delay in performance. In the event of Force Majeure, the Parties shall
immediately consult with each other in order to find an equitable solution and
shall use all reasonable endeavors to minimize the consequences of such Force
Majeure. The Party claiming Force Majeure shall take appropriate measures to
mitigate or remove the effects of Force Majeure and, within the shortest
possible time, resume as soon as possible the Contract performance affected by
the event of Force Majeure.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 27 of 32
CHAPTER 20. CONFIDENTIALITY
Article 20.1 - Confidentiality
------------------------------
20.1.1 Information relating to or relayed in connection with this Contract,
or information relating to XXXXXX XXXXXXXXXX's business and management, sales,
prices, financial affairs and business development strategies shall be kept
confidential and shall not during the term of this Contract be disclosed to any
third party (except as required in reports to the respective governments of the
Parties), unless:
(a) such information has previously been disclosed generally to the
public in a manner not involving any breach of a duty of confidentiality;
(b) disclosure to that third party is required by applicable law; or
(c) disclosure of such information was authorized by the Board.
20.1.2 All information provided by the Parties, or their respective
Affiliates, under this Contract, its Appendices, the Articles of Association and
other related agreements shall be kept confidential and not be disclosed by
XXXXXX XXXXXXXXXX, the Parties or any of their employees to any third party
(other than their respective affiliates and advisors, representatives and agents
having a need to know and being prohibited from distributing such information to
any unauthorized third party) without the prior written consent of the other
Party or its respective Affiliate providing such information, unless such
information has previously been disclosed generally to the public or is required
by applicable law.
20.1.3 Any Party in breach of this confidentiality provision shall pay the
non-breaching Parties for its actual damages and commercial losses arising
directly or indirectly from such breach and shall give rise to termination of
this Contract and dissolution, if so elected, by the non-breaching Parties as
provided in Articles 16.1.6 and 16.2.
CHAPTER 21. APPLICABLE LAW
Article 21.1 - PRC Law Applicable
----------------------------------
21.1.1 The formation of this Contract, its validity, interpretation,
performance, termination and settlement of any disputes arising hereunder shall
be governed by the Joint Venture Enterprise Law and other relevant promulgated
and publicly available laws and regulations of the PRC, Shandong Province and
Weihai Municipality. XXXXXX XXXXXXXXXX shall be a legal person under PRC law,
its legitimate operation activities and autonomy rights and the rights of the
Parties shall be fully protected under the PRC laws and regulations, and it
shall enjoy all of the applicable preferential tax treatment and other
incentives as provided under PRC laws and regulations. Where there is no PRC law
on point, the generally accepted standards and principles of international law
and customary international practice shall govern. Party A shall provide to the
Foreign Party the Chinese-language originals together with the English
translations of any the PRC, Shandong Province, Weihai Municipality or other
relevant laws and regulations which apply or may in the future apply to WEIHAI
BARRINGTON or its activities.
21.1.2 Nothing set forth herein shall be construed to require Party A to
take any action contrary to PRC law or require the Foreign Parties to take any
action contrary to applicable laws of other jurisdictions.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 28 of 32
CHAPTER 22. DISPUTE RESOLUTION
Article 22.1 - Consultations and Arbitration
--------------------------------------------
22.1.1 Any dispute arising from or in connection with this Contract, its
Appendices or the Article of Association shall be settled through friendly
consultation through the Board. If the dispute cannot be solved by the Board
through friendly consultation, the claiming Party shall promptly notify the
other Parties in a written and dated notice that a dispute has arisen and
describe the nature of the dispute. If no settlement can be reached through such
consultation between the Parties within thirty (30) days after the date of such
notice of dispute, any Party may refer the matter for final arbitration by the
Singapore International Arbitration Centre for final arbitration in Singapore by
an ad hoc arbitration tribunal according to UNCITRAL arbitration rules.
22.1.2 The arbitration tribunal shall consist of three (3) arbitrators. The
Party who applied for arbitration and the Party who being applied for
arbitration shall each appoint one arbitrator and the two arbitrators so
appointed shall jointly designate a third arbitrator. If either Party fails to
appoint its arbitrator within thirty (30) days after the first appointment, or
if the two arbitrators appointed fail to appoint the third arbitrator within
thirty (30) days after the appointment of the second arbitrator, the relevant
appointment shall be made promptly by the Singapore International Arbitration
Centre.
22.1.3 In making their decisions, the arbitrators shall be bound by the
intention of the Parties insofar as such can be ascertained from the JV
Contract, its Appendices, the Articles of Association and, where no such
intention can be ascertained, by the generally accepted standards and principles
of international law and customary international practice as they have been
applied by international tribunals in dispute resolutions. The arbitrators may
refer to both of the English and Chinese texts of this Contract, its Appendices
(whether in English, Chinese or both), and the Articles of Association.
22.1.4 The language to be used in the arbitration proceedings shall be
Chinese, with English translation. The arbitrators shall render a written
opinion in Chinese to support their decision.
22.1.5 The arbitration decision made by the arbitration tribunal under this
Chapter shall be final and binding upon both Parties. The Parties shall use
their best efforts to effect the prompt execution of any such award and shall
render whatever assistance necessary to this end. The losing Party shall be
responsible for the costs of the arbitration tribunal and the fees of the
arbitrators and the reasonable attorneys' fees, limited to 15% of the awarded
damages, and expenses of the winning Party.
22.1.6 Each of the Parties hereby expressly confirms that this Contract,
its Appendices and Articles of Association constitute a private commercial
transaction and shall not for any purpose be considered as a governmental or
sovereign act.
CHAPTER 23. LANGUAGE OF THIS CONTRACT
This Contract is written both in Chinese and English. Both versions
shall be equally valid and binding, however in case of any dispute, the Chinese
language version will take precedence.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 29 of 32
CHAPTER 24. EFFECTIVENESS OF THIS CONTRACT AND MISCELLANEOUS
Article 24.1 - Effectiveness of this Contract
---------------------------------------------
This Contract and its Appendices shall become effective upon approval
by the Approving Authority. This Contract may be amended only by a document in
writing executed by the duly authorized representatives of the Parties hereto.
Such amendments may become effective only upon approval of the original PRC
Approving Authority.
Article 24.2 - Miscellaneous Provisions
---------------------------------------
24.2.1 This Contract, including its Appendix, which is hereby incorporated
by reference as an inseparable and integral part of this Contract, and the
Articles of Association, shall constitute the whole and entire agreement between
the Parties with respect to the subject matter of this Contract and shall
supersede any prior or contemporaneous oral or written agreements or
communications between the Parties.
24.2.2 To the extent permitted by PRC law, failure or delay on the part of
either Party hereto to exercise a right, power or privilege under this Contract
and the Appendices hereto shall not operate as a waiver thereof, nor shall any
single or partial exercise of a right, power or privilege preclude any other
future exercise thereof. Any waiver by any Party of any provision of this
Contract shall not be construed as a waiver of any other provision of this
Contract, nor shall such waiver be construed as a waiver of such provision with
respect to any other event or circumstances, whether past, present or future.
24.2.3 This Contract shall be binding upon and, subject to the next
sentence, inure to the benefit of the Parties and their respective successors
and permitted assigns and all references to Party A, Party B, Party C, and
XXXXXX XXXXXXXXXX shall include their respective successors and permitted
assigns. Except as otherwise permitted or required pursuant to Articles 6.3,
16.2, and 17.8 of this Contract, no Party shall assign, delegate or transfer any
of its rights or obligations hereunder without the prior written consent of the
other Party.
Article 24.3 - Notices
----------------------
All communications or notices with respect to XXXXXX XXXXXXXXXX and
the Parties shall be delivered by express mail or facsimile to the Parties'
addresses as set forth in Chapter 2 of this Contract or, if to a Director, to
his or her address set forth in Appendix A. Notice to any Party shall be deemed
to constitute notice to each of the Directors nominated by such Party for
purposes of Board Meetings. Such communications or notices shall be deemed
received and given eight (8) business days after delivery to an internationally
recognized express courier company when sent by express mail, or eight (8)
business days after posting by air mail, properly addressed and postage paid, or
immediately when personally delivered to the Parties or Directors. Any Party or
any Director may change its posting address or facsimile number by written
notice to the other Parties and Directors.
Article 24.4 - Indemnification and Expenses
-------------------------------------------
24.4.1 To the fullest extent permitted by law, XXXXXX XXXXXXXXXX shall
indemnify and hold harmless the Parties and their respective affiliates,
Directors, management officers, employees, agents and controlling persons
(collectively, the "Indemnitees") from and against any and all claims, demands,
liabilities, damages and causes of action, losses, costs and expenses (including
amounts paid in satisfaction of judgments, in compromises, in settlements or as
fines and penalties, and legal or other costs or expenses of investigating or
defending against any claim or alleged claim, in each case whether incurred in
connection with judicial, administrative or arbitration proceedings) of any
nature whatsoever, known or unknown, liquidated or unliquidated (collectively,
"Claims"), that arise out of or in connection with the business or activities
undertaken by or on behalf of XXXXXX XXXXXXXXXX and are actually incurred by
such Indemnitee; provided that the foregoing shall only apply if the course of
conduct of such Indemnitee did not constitute fraud, gross negligence, willful
misconduct or breach of fiduciary duty or, in the case of a Party, breach of
this Contract or its Appendices.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 30 of 32
24.4.2 If XXXXXX XXXXXXXXXX is made a party to any claim, dispute or
litigation or otherwise incurs any losses, liabilities, damages, costs or
expenses (a) as a result of or in connection with the obligations or liabilities
of any Party unrelated to XXXXXX XXXXXXXXXX's business or (b) by reason of
breach of the standard as set forth in Article 24.4.1 above, the Party or
individual or entity that has breached the standard set forth in Article 24.4.1
shall indemnify and reimburse XXXXXX XXXXXXXXXX for all losses, liabilities,
damages, costs and expenses incurred thereby (including reasonable attorneys'
fees and expenses, which shall be limited to 15% of any damages awarded).
Article 24.5 - Continuing Obligations
-------------------------------------
The obligations and benefits stipulated in Article 16.2, Chapters 17 and
20, and Article 24.4 herein shall survive the termination of this Contract and
the termination, dissolution or liquidation of XXXXXX XXXXXXXXXX.
Article 24.6 - Counterparts
---------------------------
This Contract may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
Article 24.7 - Signatures
-------------------------
IN WITNESS WHEREOF, the Parties have caused this Contract to be
executed, in 6 original texts, by their representatives, duly authorized
hereunto, on February 28, 2002 in Weihai City, Shandong Province, PRC.
JOINT VENTURE CONTRACT TO ESTABLISH XXXXXX XXXXXXXXXX Page 31 of 32
(Signing Page)
PARTY A:
SHANDONG WEIGAO GROUP COMPANY, LTD.
By: __________________________
Name: Xxxx Xxx Xx
Title: Chairman
PARTY B:
BARRINGTON SCIENCES CORPORATION
By: __________________________
Name: Xxxxxx Xxxxx
Title: CEO
APPENDIX A
INITIAL BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Initial Board of Directors
--------------------------
Name Position Mailing Address Phone Number Fax Number
Xxxx Xxx Xx Chairman Yantai East Road 00-000-000-0000 00-000-000-0000
Huancui District
Weihai, Shandong
People's Republic of China
Xxxxxx Xxxxx Vice Chairman 00000 00xx Xxxxxx 0-000-000-0000 0-000-000-0000
Surrey, V4N 2V3, Canada
Xxxxx Xxx Xxx Director Yantai East Road 00-000-000-0000 00-000-000-0000
Huancui District
Weihai, Shandong
People's Republic of China
Xxxxx Xxxxxx Director 55 - 20761 Telegraph Trail 0-000-000-0000 0-000-000-0000
Xxxxxxx, XX V1M 2W3
Canada
Xxx X. Xxxxxx Director 0000 Xxxxx Xxxxx Xxxxxx, 0-000-000-0000 0-000 000-0000
Burlington, Ontario L7P 1R6
Canada
