JOINT VENTURE CONTRACT TO ESTABLISH WEIHAI BARRINGTON Page 1 of 32
CONTRACT TO ESTABLISH
A SINO-FOREIGN JOINT VENTURE
WEIHAI BARRINGTON BIOLOGICAL
ENGINEERING CO. LTD.
FEBRUARY 28, 2002
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TABLE OF CONTENTS
PAGE GENERAL PRINCIPLES 3 CHAPTER 1 DEFINED TERMS 3 CHAPTER 2 PARTIES TO THE JOINT VENTURE 5 CHAPTER 3 ESTABLISHMENT OF WEIHAI BARRINGTON; 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 WEIHAI BARRINGTON 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
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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 WEIHAI BARRINGTON dated June 03, 2001, and executed by the Parties.
"WEIHAI BARRINGTON" - means WEIHAI BARRINGTON 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 WEIHAI BARRINGTON.
"Business License Date" - means date the business license is duly issued to WEIHAI BARRINGTON.
"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$" - means (a) the amount of RMB which, as of the date of payment, could be converted into the stated amount in US dollars at the exchange rate announced by the People's Bank of China based on the previous day's PRC weighted average of buying and selling rates of the members of the China Foreign Exchange Trading Center, an inter-bank foreign exchange trading market (the "PBOC Rate"); (b) US dollar equivalent of the capital payments paid in-kind as determined by appraisal of an appraiser mutually acceptable to Parties A and B; (c) US dollars in cash; or (d) any combination of (a), (b) and (c) above.
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"Foreign Party" - means Party B.
"Force Majeure" -- Force Majeure shall have the meaning set forth in Article 19.1.1.
"Joint Venture Law" - refers to the "Law of the People's Republic of China on Sino-Foreign Contractual Joint Ventures" and its Implementing Regulations.
"MOFTEC" - refers to the PRC Ministry of Foreign Trade and Economic Cooperation.
"Party" - refers to any single Party to this JV Contract.
"Parties" - refers to both Parties to the JV Contract jointly, or if referred to as the Other Parties, then to BOTH PARTIES other than the Party taking or causing action.
"PRC" - refers to the People's Republic of China.
"RMB" - means the lawful currency of the PRC.
"SAEC" - refers to the PRC State Administration of Exchange Control.
"SAIC" - the PRC State Administration of Industry and Commerce.
"Termination" - the termination of the JV Contract, as defined further in the Contract,
`The Company' - WEIHAI BARRINGTON BIOLOGICAL ENGINEERING CO. LTD
"US$" 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.
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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: Chen Xue Li
Title: Chairman
Nationality: PRC
Telephone number: (86) 631-562-2217
Facsimile number: (86) 631-562-2563
e-mail address WHMPPGF@PUBLIC.WHPTT.SD.JN
--------------------------
2.1.2 Party B: BARRINGTON SCIENCES CORPORATION, a corporation duly
established in British Columbia, Canada, with its principal
address at 15826 98th Avenue, Surrey, B.C. V4N 2V3, Canada.
Legal Representative: George Moore
Title: CEO
Nationality: British
Telephone number: (1) 604-582-7981
Facsimile number: (1) 604-582-5749
e-mail address GEORGEMOORE@CANADA.COM
----------------------
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
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(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 WEIHAI BARRINGTON, 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 WEIHAI BARRINGTON in Weihai City, Shandong Province, PRC.
Article 3.2 - Name and Address - ------------------------------
The name of WEIHAI BARRINGTON in Chinese is [] [] [] [] [] [] [] [] []
The name of WEIHAI BARRINGTON in English is WEIHAI BARRINGTON BIOLOGICAL ENGINEERING CO. LTD..
The name of WEIHAI BARRINGTON shall be used to identify WEIHAI BARRINGTON in connection with any and all of its activities.
The legal address of WEIHAI BARRINGTON shall be at Yantai Road West, Torch High Technology Industrial Development Zone, Weihai, Shandong, PRC.
Article 3.3 - Limited Liability - -------------------------------
WEIHAI BARRINGTON shall be a limited liability Sino-foreign contractual joint venture enterprise. The liability of each Party to WEIHAI BARRINGTON 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 WEIHAI BARRINGTON other than the unpaid amount, if any, of a Party's subscribed registered capital contribution to WEIHAI BARRINGTON. Subject to the preceding sentence, WEIHAI BARRINGTON's debts and obligations shall all be settled exclusively from the then existing assets of WEIHAI BARRINGTON.
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.
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Article 4.2 - Scope of Operation - --------------------------------
The scope of the business of WEIHAI BARRINGTON 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 WEIHAI BARRINGTON'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 WEIHAI BARRINGTON'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 WEIHAI BARRINGTON.
Article 4.3 - Scale of Operation - --------------------------------
The scale of the operations of WEIHAI BARRINGTON 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.
WEIHAI BARRINGTON's products will be sold throughout the entire country of the People's Republic of China. WEIHAI BARRINGTON 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 BARRINGTON JV 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.
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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 WEIHAI BARRINGTON at WEIHAI BARRINGTON'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 WEIHAI BARRINGTON at WEIHAI BARRINGTON'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 WEIHAI BARRINGTON as set forth in Article 5.3 above, shall be for the exclusive use of WEIHAI BARRINGTON 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 WEIHAI BARRINGTON's business has been mutually prepared and consented to by the Parties;
(b) this Contract and the Articles of Association of WEIHAI BARRINGTON have been duly approved by MOFTEC;
(c) a valid business license has been duly issued to WEIHAI BARRINGTON by the SAIC;
(d) all necessary approvals and licenses necessary for WEIHAI BARRINGTON to conduct its business as contemplated under Article 4 have been obtained and are valid;
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(e) Party A shall have obtained on behalf of WEIHAI BARRINGTON an approval from the relevant office of the SAEC, a Foreign Investment Enterprise Foreign Exchange Registration Certificate and shall have opened a WEIHAI BARRINGTON 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 WEIHAI BARRINGTON.
(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), WEIHAI BARRINGTON 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 WEIHAI BARRINGTON 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 WEIHAI BARRINGTON.
Article 5.7 - Funding - ---------------------
5.7.1 WEIHAI BARRINGTON 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 WEIHAI BARRINGTON is a party in order to obtain loans and other financing. WEIHAI BARRINGTON 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. WEIHAI BARRINGTON 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 WEIHAI BARRINGTON or to guarantee a loan to WEIHAI BARRINGTON 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 WEIHAI BARRINGTON's day-to-day operations.
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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 WEIHAI BARRINGTON, 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 WEIHAI BARRINGTON except as expressly set forth in this Contract.
Article 6.2 - Future Expansion - ------------------------------
Depending upon the demand for WEIHAI BARRINGTON'S products and services and the development and operational circumstances of WEIHAI BARRINGTON, the Board may, by unanimous approval, decide to implement an expansion of its business plan (`the Expansion') and to increase the investment in WEIHAI BARRINGTON. 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 WEIHAI BARRINGTON 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 WEIHAI BARRINGTON, 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 WEIHAI BARRINGTON, 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 WEIHAI BARRINGTON 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 Conside ...
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