EXHIBIT 10.26
ADATOM SHANGHAI, LTD. CONTRACT
SHANGHAI QIFAN CO., LTD., ( Hereinafter referred to as "QIFAN ", as party A),
and ADATOM. COM INC., ( Hereinafter referred to as "ADATOM", as party B), agree
after friendly consultations and hereby enter into this CONTRACT.
ARTICLE 1- GENERAL PROVISIONS
Parties adhering to the principles of honesty, equality and mutual benefit,
shall seek for the further co-operation and development on such basis, agree
after friendly consultations and hereby enter into this CONTRACT.
ARTICLE 2- DEFINITION
Unless the provisions or context of this CONTRACT provide otherwise, the
following terms shall have the meanings set out below:
APPROVAL AUTHORITY mean the department entrusted to approve this CONTRACT
according to THE REGULATION OF SHANGHAI WAIGAOQIAO DUTY FREE ZONE.
ANNUAL BUDGET shall mean the annual Business Plan, investment plan, and
forecasts of balance sheet, profit and loss statement and cashflow.
ARTICLES OF ASSOCIATION mean the Articles of Association of the COMPANY.
BOARD OF DIRECTORS mean the board of directors of the COMPANY.
BUSINESS LICENSE mean the COMPANY's business license issued by the SAIC (as
defined below) entrusted by the SHANGHAI WAIGAOQIAO DUTY FREE ZONE to issue the
business license.
CALL OPTION mean an option by a PARTY to require the other PARTY to sell all or
part of its EQUITY PARTICIPATION to the calling PARTY.
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EFFECTIVE DATE mean the date on which the APPROVAL AUTHORITY has approved this
CONTRACT and the ARTICLES OF ASSOCIATION and has issued its certificate of
approval.
EQUITY PARTICIPATION shall mean the share owned by any of the PARTIES into the
registered capital of the JVC.
JOINTVENTURE COMPANY shall mean the Sino-American jointventure to be set up by
QIFAN and ADATOM according to this contract and to be approved by APPROVAL
AUTHORITY.
RMB shall mean the lawful currency of the PRC.
US DOLLARS or USD shall mean the lawful currency of the United States of
America.
ARTICLE 3 - PARTIES TO THE JOINT VENTURE
IV. 3.1 CHINESE PARTIES TO THE JOINT VENTURE COMPANY
The Chinese PARTIES to this CONTRACT is:
- SHANGHAI QIFAN Co., Ltd. , a limited liability company organized and
existing under the laws and regulations of the PRC, and registered
with the State Administration of Industry and Commerce, Shanghai
Municipality ("SAIC") under the registration number 3100001006179,
with its legal address at 14 Lane 199, Fangbang Road M., Shanghai,
PRC. The legal representative of QIFAN is:
Name: Bao Qifan
Position: Chairman of the Board
Nationality: Chinese
3.2 FOREIGN PARTY TO THE JOINT VENTURE COMPANY
The foreign PARTY to this CONTRACT is Adatom. com Inc., a corporation
organized and existing under the laws of U.S.A., with its legal address
at 920 Hillview Ct., Suite 160, Milpitas, California, USA. The legal
representative of ADATOM is:
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Name: Richard S. Barton
Position: President, CEO and Chairman of the Board
Nationality: United States of America
Individually referred to as a PARTY;
Collectively referred to as the PARTIES.
ARTICLE 4 - NAME, ADDRESS, LEGAL NATURE OF THE COMPANY
4.1 NAME AND ADDRESS OF THE JOINT VENTURE COMPANY
The name of the JOINT VENTURE COMPANY shall be "____________"in Chinese
and Adatom Shanghai Ltd. In English. The legal address of the JOINT
VENTURE COMPANY shall be --- Shanghai, PRC.
4.2 LIMITED LIABILITY COMPANY
The COMPANY shall be a limited liability company. The liability of each
PARTY shall be limited to the amount of its respective subscribed
contributions to the registered capital required to be made pursuant to
this CONTRACT and no PARTY shall have any liability to the COMPANY or to
any THIRD PARTY jointly or severally in excess of such amount. The
PARTIES shall share the profits and, subject to the above, bear risks and
losses in accordance with the ratio of their capital contributions as set
out in Section 6.2.
4.3 LEGAL PERSON STATUS
The COMPANY shall be a legal person under the laws of the PRC.
4.4 COMPLIANCE WITH PRC LAW
The activities of the COMPANY shall be governed and protected by the
relevant published laws, decrees, rules and regulations of the PRC and
shall comply with the provisions of this CONTRACT and the ARTICLES OF
ASSOCIATION of the COMPANY (the "ARTICLES OF ASSOCIATION") .
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ARTICLE 5 - PURPOSE, SCOPE AND SCALE OF PRODUCTION AND BUSINESS
5.1 PURPOSE AND INTENTIONS
With a view to strengthening economic co-operation, the PARTIES
acknowledge that the purpose in forming and operating the COMPANY are as
follows:
1. To cause the COMPANY to engage in the business as described in
Article 5.2. below, on the principle of maximizing profits;
2. In order to enable trade in domestic and international markets
5.2 BUSINESS SCOPE
The operation of the business will consist of all aspects of
international trade, entrepot trade, acting as a trade deputy for enterprises in
a tax-free zones, signing deputy contracts with enterprises having import-export
permits within China, doing business with enterprises in non-tax-free zone,
providing simple commercial processing, storage and trade service within
tax-free zones.
5.3 LOCATION OF OPERATIONS
The COMPANY's operations shall continually take place at the COMPANY's
site to be leased, at (25TH Floor, Baoding Mansion, No. 550 Xujiahui
Road, Shanghai, the PRC).
ARTICLE 6 - TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
6.1 COMPANY'S REGISTERED CAPITAL
The COMPANY's Registered Capital is two hundred thousand US dollars
(US$200,000.00).
6.2 RATIO OF PARTIES' CONTRIBUTIONS
The registered capital of the COMPANY, of which:
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a) QIFAN has contributed in cash eighty thousand US dollars
(US$80,000), accounting for forty percent (40 %) of the registered
capital;
b) ADATOM shall contribute in cash one hundred twenty thousand US dollars
(USD120,000), accounting for sixty percent (60 %) of the registered
capital.
6.3 TIME-SCHEDULE FOR CONTRIBUTIONS
The investment from QIFAN will be in RMB, which will be converted into
USD according to the intermediate rate announced by the State Bureau of Foreign
Exchange Administration on the same day the contract executed.
The investment from Adatom will be in USD.
The investment from the two Parties shall be due within fifteen (15) days
from executing on this contract.
6.4 WORKING CAPITAL AND ADDITIONAL FINANCING
The COMPANY may borrow any necessary funds from domestic or international
banks or other financial institutions on terms and conditions approved by
the Board of Directors.
Neither PARTY shall be obligated to lend funds to the COMPANY or to
guarantee loans from THIRD PARTIES. However, if, at the request of the
Board of Directors, a PARTY does agree to lend funds to the COMPANY, or
to guarantee a loan to the COMPANY from a THIRD PARTY such PARTY shall be
entitled to be paid interest on the loan or guarantee fees as if such
PARTY was not a PARTY to the COMPANY. The interest of such loan and the
guarantee fee shall not be higher than the standard published by the Bank
of China at that time.
Unless otherwise decided by the PARTIES, the PARTIES shall guarantee
loans in proportion to their respective EQUITY PARTICIPATION.
6.5 DECREASE OR INCREASE OF REGISTERED CAPITAL
During the COMPANY Term, the COMPANY may not reduce the amount of its
registered capital, except if unanimously agreed by the BOARD OF
DIRECTORS, and approved by the APPROVAL AUTHORITY. The registered capital
of the COMPANY may be increased with the unanimous agreement of the BOARD
OF DIRECTORS and the approval of the APPROVAL AUTHORITY.
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Further increase of the registered capital of the COMPANY shall be
subscribed and be paid by the PARTIES according to their respective
EQUITY PARTICIPATION. In case a PARTY agrees, but is not in a position to
contribute to such increase of the registered capital, its EQUITY
PARTICIPATION shall be reduced in proportion.
6.6 ASSIGNMENT OF EQUITY PARTICIPATION
Neither PARTY may assign, sell or otherwise dispose of all or part of its
EQUITY PARTICIPATION without the prior consent in writing of the other
PARTIES. If either PARTY desires to assign, sell or otherwise dispose of
all or part of its subscribed contribution in the COMPANY, such PARTY
shall first make an offer to the other PARTIES, stating the price and
other conditions of sale. In such case, the other PARTIES shall have the
option to purchase the subscribed contributions in the COMPANY offered
for sale, which option must be exercised within ninety (90) days after
receipt of the offer. If such option is not exercised within such ninety
(90) day period, the offering PARTY may assign, sell or otherwise dispose
of its subscribed contribution in the COMPANY to any THIRD PARTY at the
price and on the terms and conditions which are the same as or not more
favorable than those contained in the offer first made to the other
PARTIES. Any such sale by either PARTY to the other PARTIES or to THIRD
PARTY shall be subject to the unanimous approval of the BOARD and the
approval of the APPROVAL AUTHORITY. Further, any such sale to a THIRD
PARTY shall be effective on conditions that such THIRD PARTY undertakes
in writing to the other PARTIES its unconditional acceptance of all the
rights and obligations assumed by the assigning PARTY under this
CONTRACT.
6.7 INVESTMENT CERTIFICATES
After the PARTIES have each made their capital contributions to the
registered capital of the COMPANY, the COMPANY shall engage acertified
public accountant registered in the PRC to verify that such contributions
have been made and to issue a verification report by the accounting firm,
the COMPANY shall issue an investment certificate to each PARTY signed by
the Chairman and the Vice-Chairman of the Board, confirming the amount
contributed by such PARTY and the date of such contribution.
ARTICLE 7 - THE BOARD OF DIRECTORS
7.1 DATE OF ESTABLISHMENT OF THE BOARD
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The BOARD of the COMPANY shall be established on the date the COMPANY is
registered and its BUSINESS LICENSE is issued.
7.2 COMPOSITION OF THE BOARD
The BOARD shall initially consist of five directors, two appointed by
QIFAN, three by ADATOM.
The five directors shall include, one Chairman, be appointed by ADATOM,
and one Vice-Chairmen, be appointed by QIFAN.
The Directors shall be appointed for a term of four (4) years and may
serve consecutive terms if re-appointed by the originally appointing
PARTY.
A PARTY may, at any time, remove any director appointed by such PARTY
giving written notice to the COMPANY with a copy of such notice to the
other PARTY. The COMPANY against any claim by such director of whatever
nature arising in connection therewith, provided that such claim has been
validated by the competent jurisdiction.
Directors shall not be paid a fee by the COMPANY nor shall be employee of
the COMPANY.
In case a PARTY's EQUITY PARTICIPATION is increased or is reduced at any
given time, the number of directors the PARTIES are entitled to appoint
and/or maintain at the BOARD shall be changed to a ratio which
corresponds as closely as possible, to the allocation of the registered
capital among them. Notwithstanding the preceding sentence, the PARTY
holding the greater stake in the equity of the COMPANY at any given time
shall be entitled to the majority of the number of seats at the Board.
7.3 DECISIONS OF THE BOARD
The BOARD shall be the highest authority of the COMPANY. It shall decide
all major issues concerning the COMPANY.
7.3.1. DECISIONS REQUIRING UNANIMITY
Decisions of the BOARD involving the following matters shall require
unanimous approval of all members of the Board:
1) amendment of this CONTRACT and of the ARTICLES OF ASSOCIATION; or
2) extension of duration, early termination and dissolution of the
COMPANY; or
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3) increase or decrease of the COMPANY's registered capital; or
4) any assignment, sale, mortgage, pledge, charge, lien or other collate-
ral that could cause the involuntary transfer of all or a portion of
a PARTY's registered capital in accordance with the provisions of
Section 6.6 hereof, and
5) a merger of the COMPANY with any other organization.
6) Change of the scope of business of the COMPANY.
7) Profit distribution.
8) Annual budget plan.
9) Establish a branch in or out the PRC.
10)Bank loans.
11)Appointment of general manager.
7.3.2. DECISION REQUIRING SIMPLE MAJORITY
Decisions involving all other matters, except for those to be decided by
the General Manager as provided for in this CONTRACT, shall be adopted by
an affirmative vote of a simple majority of all members of the Board.
7.4 CHAIRMAN AND VICE-CHAIRMEN OF THE BOARD
The Chairman of the BOARD shall be the legal representative of the
COMPANY. The Chairman shall be assisted by the Vice-Chairmen.
The Chairman shall act in accordance with corporate policy, objectives
and resolutions decided or voted by the BOARD and his/her actions shall
only bind the COMPANY if taken within the scope of authorization by the
board.
Whenever the Chairman of the BOARD is unable to perform his/her
responsibilities for any reason, the Chairman shall authorize by written
proxy the Vice-Chairmen of the BOARD to act as the representative of the
COMPANY.
7.5 MEETINGS OF THE BOARD
The BOARD shall convene in principle, at least once every year. The
meetings shall be called and presided over by the Chairman of the Board.
Such meetings shall be held at the place where the COMPANY is located,
and may also be held at such other places within or outside the PRC as
decided by the Board.
A BOARD meeting requires a quorum of three directors, at least one
director each party. Should any director be unable to attend a meeting of
the Board, he may authorize another director to act as his/her
representative by written proxy to attend such meeting in his/her name
and on his/her behalf. Such representative shall vote in the place of
such director. In the event that no representative is
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appointed by the absent director to attend a meeting of the Board, the
absent director shall be deemed to have waived his/her right to vote in
such meeting.
Travel and accommodation expenses of the directors attending BOARD
meetings shall be borne by each PARTY.
In lieu of a meeting of the Board, the BOARD may adopt a written
resolution. Such a resolution is adopted if sent to all members of the
BOARD and affirmatively signed by the number of directors necessary to
make such a decision as stipulated in Section 7.3.
BOARD meetings shall be conducted in Chinese or in English, if necessary.
Minutes of all meetings of the BOARD and resolutions adopted in lieu of a
meeting shall be drafted in Chinese, or in English, if necessary, and
shall be kept in the minute book of the COMPANY at the COMPANY's legal
address.
7.6 ENTRUSTMENT OF THE BOARD OF DIRECTORS
Governance is the responsibility of the Board of Directors and operation
is the responsibility of the Management. When the Board of Directors is not in
session, QIFAN is the entrusted representative to take care of the examination
and administration of the routine affairs concerning financing, tariff,
personnel, resolutions of the Board of Directors and will be reported in detail
to the BOARD afterwards.
7.7 DEADLOCK
If the following situations occur:
(1) The Board of Directors cannot reach an agreeing majority according
to item 7.3;
(2) A resolution cannot be made after two consecutive meetings (the
second meeting is held within 30 days of the first meeting); and
(3) The situation affects the well being of the company.
Then the issue should be referred to the administrator of the highest
level of the two respective parties. The two parties agree to treat each other
with honesty, sincerity and to make every effort to bridge the disagreement. If
the two parties cannot reach a solution acceptable to both parties within ninety
(90) days of the last meeting, each party has the right to refer to arbitration
or propose to dissolve the company according to item XIX and item XIIV.
ARTICLE 8 - OPERATION AND MANAGEMENT ORGANISATION
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8.1 RESPONSIBILITIES OF THE GENERAL MANAGER
The General Manager shall be nominated by QIFAN and shall be confirmed by
and directly responsible to the Board. He shall carry out the various
resolutions of the BOARD and in accordance therewith, organize and direct
the production, distribution and sales of the PRODUCTS of the COMPANY as
well as the day-to-day management and operations of the COMPANY.
Within the scope of authorization by the Board, the General Manager
shall, externally, represent the COMPANY and, internally, have the right
to appoint and dismiss his/her subordinates, and to exercise other
responsibilities, powers and duties as authorized by the Board.
The COMPANY shall also have divisions as determined by the BOARD on the
recommendation of the General Manager. The managers of these divisions
shall be responsible respectively for the work of such divisions, and
shall handle matters delegated to them by the General Manager and shall
be responsible to the General Manager who shall be responsible for
appointing and for discharging such division managers.
Only the General Manager, or a representative of the COMPANY authorized
in writing by the General Manager, shall have the authority to enter into
binding commitments, undertakings or obligations in the name and on
behalf of the COMPANY.
8.2 ANNUAL BUDGETS AND BUSINESS REPORTS
The General Manager shall prepare and submit to the BOARD proposed
capital and operating budgets, each year in October for the subsequent
year, which the BOARD shall adopt with such revisions as the BOARD shall
deem appropriate.
8.3 CONCURRENT POSTS
The General Manager, other senior management personnel may not hold posts
concurrently of any other economic organization; however, that the
preceding sentence shall not prohibit the General Manager from being
seconded to the COMPANY by the PARTIES while remaining under the employ
of the seconding PARTY.
8.4 NEGLECT OF DUTY
In the event of graft or serious breach or neglect of duty on the part of
the General Manager and/or Deputy General Manager, the BOARD OF DIRECTORS
shall have the authority to revoke the same. The General Manager shall
have the
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authority to dismiss any manager or subordinate who has
committed graft or has seriously breached or neglected his/her duty.
ARTICLE 9 - LABOR MANAGEMENT
9.1 LABOR PLANS
Plans regarding the recruitment, employment, dismissal, resignation,
wages, labor protection, welfare benefits, and labor discipline of the
staff and workers of the COMPANY shall be formulated by the General
Manager in accordance with the relevant PRC laws and regulations, for
review and approval by the Board.
9.2 RECRUITING AND HIRING
The COMPANY shall recruit its staff and workers in the open market.
No Employee of the COMPANY, including the General Manager may participate
in any commercial and/or technical activity in competition with the
COMPANY.
9.3 SALARY AND WELFARE
The salary will be decided on the basis of the average level of similar
firm in Shanghai.
Due to pertinent regulation of Shanghai, the COMPANY shall pay medical
insurance and overall fund for his employee and draw welfare fund.
9.4 DISCIPLINARY ACTION
In accordance with the guidelines set out by the Board, the General
Manager shall have the right to take disciplinary action against staff
and workers by giving warnings, recording demerits or reducing salaries
or wages. Staff and workers who commit serious offenses, who prove to be
incompetent or unsuited for the work to be performed by them, may be
dismissed by the General Manager. Dismissal of any staff member or worker
shall be reported to the local labor bureau for the record.
9.5 TRADE UNION
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A trade union organization may be established in accordance with relevant
PRC laws and regulations. The COMPANY shall contribute two percent (2%)
of the actual wages earned each month by the COMPANY's staff and workers
to the trade union fund for such trade union use in accordance with the
applicable laws of the PRC on the management of trade unions.
ARTICLE 10 - TAXES
10.1 COMPANY TAXES
The COMPANY shall pay taxes in accordance with the stipulations of
relevant PRC laws and regulations taking into consideration the various
preferential tax treatments given by the State to joint venture
companies, as well as the various types of preferential treatment given
by the Shanghai Municipal Government or other local government to
sino-foreign joint ventures. Any taxes, duties or other levies and
charges to be paid in the PRC shall be paid in RMB.
10.2 INDIVIDUAL INCOME TAX
Staff members and workers of the COMPANY shall pay individual income tax
according to the Individual Income Tax Law of the PRC or other laws and
regulations of the PRC as applicable.
ARTICLE 11. ACCOUNTING AND AUDITING
11.1 ACCOUNTING SYSTEM
1) The chief financial officer of the COMPANY, under the supervision
of the General Manager, shall be responsible for the financial
management of the COMPANY. Among his/her duties, the chief
financial officer shall organize the compilation of financial
statements. The chief financial officer shall report to the General
Manager and the Board.
2) The COMPANY shall adopt the internationally practiced accrual basis
of accounting and the debit and credit method for book keeping, and
shall prepare complete, accurate and appropriate financial and
accounting books and records satisfactory to all PARTIES and the
BOARD and in accordance
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with the Accounting System of the People's Republic of China for
Foreign Investment Enterprises and in accordance with the
internationally generally accepted accounting principles (the
"International GAAP").
3) At the end of each month and the end of each fiscal year of the
COMPANY, the chief financial officer shall prepare financial
statements for the COMPANY, including a balance sheet, profit and
loss statement, and statement of changes in financial position both
under PRC accounting rules and under International GAAP.
4) RMB shall be used as the unit of account by the COMPANY in its
financial accounting. Financial statements prepared in accordance
with International GAAP pursuant to Section 17.1.(3) shall be
prepared in both RMB and United States Dollars. Cash, bank
deposits, foreign currency loans as well as creditors' rights,
debts, income and expenses, etc., which are denominated in
currencies different from the unit of account shall be recorded in
the currency of actual receipt and payment. Treatment of exchange
gains and losses arising from exchange rate differences shall
accord with the accounting treatment for foreign currency
transactions announced by SAFE.
5) The accounting system and procedures to be adopted by the COMPANY
shall be prepared by the chief financial officer, under the
supervision of the General Manager, and submitted to the BOARD for
approval. Once approved by the Board, the accounting system and
procedures shall be filed with the local department of finance and
the tax authorities for the record.
6) The fiscal year of the COMPANY shall begin on January 1st and end
on December 31st of each year. All accounting records, vouchers,
books, financial statements and reports of the COMPANY shall be
made and kept in Chinese and copies shall be provided in a timely
fashion to each Member the Board. All important financial and
accounting records and statements shall require the approval and
signature of the General Manager and the chief financial officer.
7) Tax returns for the COMPANY shall be prepared in accordance with
the applicable laws and regulations of the PRC under the
supervision of the chief financial officer and shall be approved
and signed by the General Manager.
11.2 AUDITING
11.2.1. STATUTORY AUDIT
The BOARD shall engage a major accounting firm registered in the PRC to
be its auditor and to examine and verify the financial accounting of the
COMPANY. The results of the auditor's examination shall be reported to
the BOARD and the General Manager. The COMPANY shall submit to the
PARTIES and to each
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director the audited annual accounts within ninety (90) days after
the end of the fiscal year, together with the audit report of the
independent auditor.
11.2.2. INDEPENDENT AUDIT
The PARTIES shall each have the right to request an audit on the COMPANY
books and accounts at any time. Such an audit shall be conducted at the
option of the requesting PARTY, either by its own internal auditing
staff, or by an independent CPA to be retained at its own expenses.
ARTICLE 12 - PROFIT DISTRIBUTION
12.1 CONTRIBUTIONS TO THE THREE FUNDS
10% of the after-tax profits should be drawn to use as an accumulation
fund and 5% as the public welfare fund. According to the operational
situation of the company, the joint venture can draw certain percentage
of accumulation and public welfare at its will.
If the amount of the total drawing of the accumulation fund surpasses 50%
of the registered capital, no other drawing can be performed.
12.2 DISTRIBUTION OF PROFITS
The after-tax profits of the joint venture should be distributed in the
following order:
(1) To make up the losses of the previous year;
(2) To collect accumulation and public welfare fund according to item
12.1;
(3) To collect certain amount of reward fund, the percentage should be
decided by the Board of Directors;
(4) To distribute in accordance with the investment proportion of each
party.
The calculation of the amounts of dividends to be paid in US Dollars
shall be made at the OFFICIAL EXCHANGE RATE at the date of the BOARD OF
DIRECTORS' decision to distribute dividends.
Payments of dividends shall be made at the same date for the PARTIES, by
transfer to the PARTIES' bank accounts within thirty (30) days from the
date of the Board's decision to distribute dividends.
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ARTICLE 13 - FOREIGN EXCHANGE
13.1 GENERAL
All foreign exchange matters of the COMPANY shall be handled in
accordance with relevant PRC foreign exchange regulations (the "Foreign
Exchange Regulations").
13.2 FOREIGN EXCHANGE REQUIREMENTS OF THE COMPANY
The foreign exchange funds of the COMPANY (such as foreign exchange
capital invested and foreign currency loans) shall be deposited in the
foreign exchange account or accounts of the COMPANY. Subject to the
provisions of this Article, all foreign exchange payments of the COMPANY
shall be paid out of the above-mentioned foreign exchange accounts.
All payments by the COMPANY to ADATOM shall be made in US Dollars. Unless
otherwise specified in this CONTRACT or in contracts entered into by the
COMPANY, all expenses, loan repayments, labor compensation and other
charges of the COMPANY paid to PRC enterprises or nationals shall be paid
in RMB.
13.3 APPLICABLE FOREIGN EXCHANGE RATE
The foreign exchange rate applicable to the conversion of RMB to foreign
currency or vice versa shall be the rate quoted by the SAFE on the date
the operation (payment of royalty, dividends, interest, fees,
commissions, purchase or sale price, etc.) occurs.
ARTICLE 14 - DURATION OF THE JOINT VENTURE
14.1 DURATION OF THE COMPANY
The duration of the Company (the "Company Term") shall be ten (10) years
starting from the date on which the Company is approved by the Approval
Authority.
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14.2 EXTENSION OF THE COMPANY TERM
At least one (1) year prior to the expiration of the Company Term, the
Parties shall hold consultations to discuss the extension of the Company
Term. If all Parties agree to extend the Company Term, an application for
such extension shall be submitted to the Approval Authority for approval
not less than six (6) months prior to the expiration of the Company Term.
Any extension of the term as approved shall be registered.
ARTICLE 15 - TERMINATION AND DISSOLUTION
15.1 TERMINATION
Neither PARTY shall have the right, in its sole discretion and without
cause, to terminate this CONTRACT. A PARTY may submit written notice to
the other PARTY of an intention to terminate this CONTRACT at any time
if:
(1) the other PARTY fundamentally breaches this CONTRACT or violates
the ARTICLES OF ASSOCIATION thus adversely affecting the benefits
the notifying PARTY expected to receive at the time of the signing
of this CONTRACT and such breach or violation is not cured within
thirty (30) days of written notice to the breaching PARTY;
(2) the other PARTY becomes bankrupt, or is the subject of proceeding
for liquidation or dissolution, or ceases to carry on business or
becomes unable to pay its debts as they come due;
(3) the COMPANY becomes bankrupt, or is the subject of proceedings for
liquidation or dissolution, or ceases to carry on business or
becomes unable to pay its debts as they come due;
(4) all or any part of the assets of the COMPANY are taken from the
COMPANY and such taking has a material adverse effect on the
business, operations or properties of the COMPANY;
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(5) the conditions or consequences of Force Majeure (as hereinafter
defined) which have a material adverse effect on the business,
properties or operations of the COMPANY for a period in excess of
six (6)months and the PARTIES have been unable to find an equitable
solution pursuant to article 30.1 hereof ;
(6) the COMPANY incurs for three consecutive years aggregate operat-
ing losses in excess of 33.3% of the COMPANY's registered capital.
(7) the Board of Directors is unable to agree on a unanimous decision
or a qualified majority decision as per Article 7.6.
The mere submission by either PARTY of a notice indicating an intention
to terminate this CONTRACT shall not by itself constitute a termination
of this CONTRACT.
15.2 NOTIFICATION PROCEDURE
In the event that either PARTY gives written notice of a desire to
terminate this CONTRACT pursuant to Article 14.1. above with respect to
any matter specified under clauses(1)through(3)and (6) thereof, the
PARTIES shall for a two(2) months period after such notice is given
conduct negotiations and endeavor to resolve the situation which resulted
in the giving of such notice. In the event such matters are not resolved
to the satisfaction of the PARTIES within two(2) months of the date of
such notice, each PARTY shall cause the members of the BOARD appointed by
it to vote in favor of a resolution approving the termination of this
CONTRACT, and the BOARD shall submit a termination application for
approval by the original Examination and APPROVAL AUTHORITY.
In addition, in the event that either PARTY gives written notice of a
desire to terminate this CONTRACT pursuant to Article 14.1 above with
respect to any matter specified under clauses (4), (5) thereof, no
further negotiations between the PARTIES shall be required, and the BOARD
shall submit a termination application for approval by the original
Examination and APPROVAL AUTHORITY.
ARTICLE 16 - LIQUIDATION
16.1 At the expiration of the term of the joint venture without renewal, or in
the event that this CONTRACT is terminated pursuant to Article 14.1 and
Article 14.2 hereof, and the PARTIES cannot agree on the sale of the
registered capital of the COMPANY to a PARTIES or to a THIRD PARTY, then
the BOARD shall, within ten (10) days, appoint a liquidation committee
which shall. have the power to represent the COMPANY in all legal
matters, including legal proceedings. The
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liquidation committee shall value and liquidate the COMPANY's assets
in accordance with the applicable Chinese laws and regulations and
the principles set out herein.
16.2 The liquidation committee shall consist of three members, of which two
members shall be nominated by ADATOM and one members shall be nominated
by QIFAN. Members of the liquidation committee may, but need not be,
BOARD Directors or senior employees of the COMPANY. If either PARTY
chooses to appoint professional advisors to assist the liquidation
committee, the costs shall be borne by the PARTY. The BOARD shall report
the formation of the liquidation committee to the supervising authority
in charge of the COMPANY.
16.3 The liquidation committee shall conduct a thorough examination of the
COMPANY's assets and liabilities, on the basis of which it shall, in
accordance with the relevant provisions or this CONTRACT, develop a
liquidation plan which, if approved by the Board, shall be executed under
the liquidation committee's supervision. The liquidation plan shall
provide that PARTIES will have the right to purchase any of the machinery
and equipment and other facilities.
16.4 The liquidation expenses, including remuneration to members of the
liquidation committee, shall be paid out of the COMPANY's assets in
priority to the claims of other creditors. The COMPANY shall pay and
settle all other requirements under applicable law and as set forth
herein.
Any money received by the COMPANY from the liquidation of its assets
shall be applied in the following order:
o First, to the payment of liquidation expenses and remuneration
of the members of the Liquidation Committee;
o Second, to the payment of expenses incurred in making public
notices and expenses in litigation or arbitration ;
o Third, to the payment of outstanding salaries and benefits for the
COMPANY's staff, and labor insurance premiums ;
o Fourth, to the payment of outstanding State taxes ;
o Fifth, to the payment of other debts ;
o Sixth, to the establishment of any reserves that the Board of
Directors, in accordance with sound business judgment, deems reasonably
necessary to
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provide for the payment when due of any contingent or unforeseen
liabilities or obligations of the COMPANY ;
o Seventh, to the PARTIES in accordance with their respective
EQUITY PARTICIPATION.
16.5 On completion of all liquidation procedures, the liquidation committee
shall submit a final report approved by the BOARD and an independent
accountant registered in CHINA to the Examination and APPROVAL AUTHORITY,
and complete all other formalities for nullifying the COMPANY's
registration. An announcement of the termination of the COMPANY shall be
published in both national and local newspapers.
ARTICLE 17 - BREACH OF CONTRACT
17.1 LIABILITY FOR BREACH OF CONTRACT
If any PARTY fails to perform any of its obligations under this CONTRACT
or if any PARTY's representation or warranty under this CONTRACT is
untrue or materially inaccurate, such PARTY shall be deemed to have
breached this CONTRACT. The PARTY in breach shall have thirty (30) days
from receipt of notice from the other PARTY specifying the breach to
correct such breach. If, after such thirty (30) day period, the breach is
not corrected, then the PARTY in breach shall be liable to the other
PARTY for all direct and foreseeable damages caused by the breach.
17.2 Should all or part of this CONTRACT be unable to be fulfilled as a result
of action or omission of one PARTY, the breaching PARTY shall bear the
responsibilities thereof. Should it be the fault of both PARTIES, they
shall bear respective responsibilities according to the actual situation.
17.3 Should the COMPANY be unable to continue its operations or to achieve the
business purpose stipulated in this CONTRACT due to the fact that one of
the PARTIES fails to fulfill the obligations prescribed by this CONTRACT
and the ARTICLES OF ASSOCIATION , or should one of the PARTIES seriously
violate the stipulations of this CONTRACT and the ARTICLES OF
ASSOCIATION,
And should the breaching PARTY fail to remedy such failure or violation
within thirty (30) days of the receipt of a written notice sent by the
other PARTY,
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The non defaulting PARTY shall have the right to terminate this CONTRACT
as well as to claim damages.
In case the PARTIES agree to continue enforcing this CONTRACT, the
breaching PARTY shall be liable to the economic losses caused to the non
defaulting PARTY and/ or the COMPANY.
ARTICLE 18 - FORCE MAJEURE
18.1 "Force Majeure" shall mean any unforeseeable event that is beyond the
reasonable control of a PARTY and prevents that PARTY in whole or in
part from performing any obligation under this CONTRACT or from
performing any obligation under this CONTRACT in a timely manner,
including the occurrence of fire, flood, epidemic, earthquake, storm,
tidal wave or other acts of nature; riot, war, hostility or public
disturbance; and any other events recognized as Force Majeure in
general international commercial practice.
18.2 If an event of Force Majeure occurs, a PARTY's contractual obligations
affected by such an event under this CONTRACT shall be suspended during
the period of delay caused by the Force Majeure and shall be
automatically extended, without penalty, for a period equal to such
suspension.
18.3 The PARTY claiming Force Majeure shall promptly inform the other PARTY
in writing and shall furnish within 30 days thereafter sufficient proof
of the occurrence and duration of such Force Majeure. The PARTY
claiming Force Majeure shall also use all reasonable endeavors to
terminate the Force Majeure.
18.4 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.
According to the effects on the performance of the CONTRACT, the
PARTIES will consult each other to decide whether :
o to terminate this CONTRACT ;
o or to exempt one PARTY or the PARTIES from implementing part of
its/their obligations according to this CONTRACT ;
o or to delay the performance of this CONTRACT.
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ARTICLE 19 - SETTLEMENT OF DISPUTES
19.1 FRIENDLY CONSULTATIONS
In the event of any dispute, controversy or claim (collectively,
"dispute") arising out of or relating to this CONTRACT or ARTICLES OF
ASSOCIATION, or the breach, termination or invalidity thereof, the
PARTIES shall attempt in the first instance to resolve such dispute
through friendly consultations.
19.2 ARBITRATION
IF the dispute is not resolved by friendly consultations within sixty
(60) days after the commencement of such consultations, it may submitted
for arbitration, upon the request of any PARTY with notice to the other
PARTY.
The arbitration proceedings shall be held in Shanghai, China by the China
International Economic & Trade Arbitration Commission (CIETAC). In case
of discrepancy between the Chinese and the English version of this
CONTRACT, the Chinese version shall prevail.
(a) The arbitration award shall be final and binding on the PARTIES,
and the PARTIES agree to be bound thereby and to act accordingly.
By submitting the dispute to arbitration, the PARTIES shall have
undertaken to carry out the resulting award without delay.
(b) All costs of arbitration shall be borne by the PARTIES as deter-
mined by the arbitration tribunal.
19.3 REMAINING RIGHTS AND OBLIGATIONS
When any dispute occurs and is the subject of friendly consultations,
joint conciliation or arbitration, the PARTIES shall continue to exercise
their remaining respective rights, and fulfil their remaining respective
obligations, under this CONTRACT, except in respect of those matters
under dispute.
ARTICLE 20 - APPLICABLE LAW
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The validity, interpretation, implementation and the settlement of disputes in
respect of this CONTRACT shall be governed by the laws of the People's Republic
of China which are published and publicly available, but in the event that there
is no published and publicly available law in CHINA governing a particular
matter relating to this CONTRACT, reference shall be made to general
international commercial practices.
ARTICLE 21 - MISCELLANEOUS PROVISIONS
21.1 BINDING EFFECT
This CONTRACT is made for the benefit of the PARTIES and is legally
binding on them. This CONTRACT may not be changed orally, but only by a
written instrument signed by the PARTIES and approved by the APPROVAL
AUTHORITY.
21.2 LANGUAGE
This CONTRACT is executed in the Chinese language in four originals and
in the English language in four originals. In case of discrepancy between
the Chinese and the English version of this CONTRACT, the Chinese version
shall prevail.
21.3 NOTICES
Any notice or written communication by either PARTY to the other,
including but not limited to any and all offers, writings, or notices to
be given hereunder, shall be sent by EPS, facsimile or e-mail confirmed.
The date of receipt of a notice or communication hereunder shall be
deemed to be fifteen (15) days after the letter is given to EPS and three
(3) working days after dispatch in the case of a facsimile or e-mail. All
notices and communications shall be sent to the appropriate address set
forth below, until the same is changed by written notice to the other
PARTIES.
Address of QIFAN: 25th Floor, No. 550 Xujiahui Road, Shanghai China
Postal Code: 200025
Telephone: 86-21-54560914
Fax: 86-21-64451622
E-mail: [email protected]
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Address of ADATOM: 920 Hillview Ct., Suite 160
Milpitas, California, USA
Postal Code: 95035
Telephone: 1-408-935-7979
Fax: 1-408-715-5130
Email: [email protected]
21.4 EFFECTIVENESS
21.4.1 The ARTICLES OF ASSOCIATION shall come into effect together
with this CONTRACT.
21.4.2 This CONTRACT and the ARTICLES OF ASSOCIATION shall not become
effective until signed by the PARTIES and obtained a formal
approval of the APPROVAL AUTHORITY
21.5 ADDRESS AND TIME OF SIGNING THE CONTRACT
This CONTRACT is signed by the appointed representatives of QIFAN and
ADATOM in Shanghai, PRC on 10/30/00
SHANGHAI QIFAN CO., LTD. ADATOM.COM. INC.
Name of representative: Name of representative:
/s/ Bao QiFan /s/ Richard S. Barton
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Position: Chairman Position: President
Nationality:
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