EXHIBIT 10.1
JOINT VENTURE CONTRACT
on the establishment of
"SHIJIAZHUANG - UNIGENE PHARMACEUTICAL
CORPORATION LIMITED"
between
Shijiazhuang Pharmaceutical Group Company, Ltd.
And
Unigene Laboratories, Inc.
June 15, 2000
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TABLE OF CONTENTS
Chapter I GENERAL PROVISIONS...............................................3
Chapter II CONTRACTING PARTIES.............................................3
Chapter III ESTABLISHMENT OF THE JOINT VENTURE.............................3
Chapter IV PURPOSE, SCOPE AND SCALE OF OPERATION...........................4
Chapter V TOTAL INVESTMENT AND REGISTERED CAPITAL..........................5
Chapter VI RESPONSIBILITIES OF CONTRACT PARTIES............................7
Chapter VII TECHNOLOGY CONTRIBUTION........................................8
Chapter VIII SALES OF PRODUCTS............................................10
Chapter IX BOARD OF DIRECTORS.............................................11
Chapter X MANAGEMENT ORGANIZATION.........................................13
Chapter XI PURCHASE OF EQUIPMENT..........................................13
Chapter XII MANAGEMENT OF LABOR...........................................13
Chapter XIII TRANSFER OF JV RIGHTS........................................14
Chapter XIV TAXATION, ACCOUNTING AND AUDITING.............................15
Chapter XV PROFITS AND LOSSES.............................................16
Chapter XVI REPRESENTATIONS, WARRANTIES AND COVENANTS.....................16
Chapter XVII TERM OF JOINT VENTURE CONTRACT...............................17
Chapter XVIII EFFECT OF CONTRACT EXPIRATION OR TERMINATION................17
Chapter XIX INSURANCE.....................................................18
Chapter XX CONTRACT AMENDMENT, ALTERATION AND TERMINATION.................18
Chapter XXI RESPONSIBILITIES OF CONTRACT BREACH...........................19
Chapter XXII FORCE MAJEURE................................................20
Chapter XXIII APPLICABLE LAWS.............................................20
Chapter XXIV RESOLUTION OF DISPUTES.......................................20
Chapter XXV LANGUAGES.....................................................20
Chapter XXVI MISCELLANEOUS................................................20
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CHAPTER I GENERAL PROVISIONS
This contract for the establishment of an equity joint venture in Shijiazhuang,
Hebei Province, People's Republic of China (the "PRC"), is entered into on June
15, 2000, through friendly negotiation based on principles of equality and
mutual benefits, by and between Shijiazhuang Pharmaceutical Group Company,
Ltd.("Party A") and Unigene Laboratories, Inc.("Party B") pursuant to the Law of
the PRC on Joint Ventures Using Chinese and Foreign Investment (the "Law") and
other relevant laws and regulations.
CHAPTER II CONTRACTING PARTIES
ARTICLE 1. Parties to the Contract
1.1. Party A is Shijiazhuang Pharmaceutical Group Company, Ltd., a legal person
established under the laws of the PRC, registered with the Administrative Bureau
for Industry and Commerce of Shijiazhuang, Hebei Province, PRC. Legal Address:
276 Zhongshan West Road Shijiazhuang, Hebei Province, PRC Legal Representative:
Mr. Cai Dong Chen Position: Chairman and President Nationality: Chinese
1.2. Party B is Unigene Laboratories, Inc., established and registered under the
laws of the State of Delaware, United States of America (USA). Legal Address:
110 Little Falls Road, Fairfield, New Jersey, 07004, USA, Legal Representative:
Dr. Warren P. Levy Position: President Nationality: American
1.3. Party A and Party B are each referred to as a "JV Party" and collectively
referred to as the "JV Parties".
CHAPTER III ESTABLISHMENT OF THE JOINT VENTURE
ARTICLE 2. Establishment of JV
Party A and Party B hereby establish "Shijiazhuang - Unigene Pharmaceutical
Corporation Limited" (hereafter referred to as the "JV") in the PRC pursuant to
this Contract, the Law and other relevant PRC laws and regulations.
ARTICLE 3. Name and Address of the JV
3.1 The name of the JV in Chinese is "____________________"; and the name of the
JV in English is "Shijiazhuang - Unigene Pharmaceutical Corporation Limited."
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3.2 The JV's legal address is High and New Technology Industrial Development
Zone, Shijiazhuang, Hebei Province.
ARTICLE 4. The JV is established under the Law of the PRC and all activities of
the JV shall conform to the pertinent laws, decrees, rules and regulations of
the PRC.
ARTICLE 5. The JV takes the form of a limited liability company. Party A and
Party B are liable up to amount of their respective capital contribution
subscribed. Each party is entitled to the profits and liable to the risks and
losses equivalent to such party's Distribution Ratio (as defined below), as set
forth in Article 56.
ARTICLE 6. The JV shall be deemed to have been established as of the date its
business license is issued pursuant to the Law (the "Establishment Date"). This
Contract shall be effective as of the date it is approved by the National
Administration of High and New Technology Industrial Development Zone,
Shijiazhuang, Hebei Province (the "Effective Date").
ARTICLE 7. Promptly following the Establishment Date, the parties hereto shall
cause the JV to ratify this Contract, whereby the JV shall agree to be bound by
the provisions of this Contract as if it were a party hereto in its own right.
An instrument evidencing such ratification shall be furnished to each of the
parties.
ARTICLE 8. The JV Parties hereby adopt and shall execute the Articles of
Association for the JV.
ARTICLE 9. Promptly after the first capital contributions required by Article
15.1(a) and 15.2(a) have been made by each party, the JV and Party B shall
execute a Technology Transfer Agreement (the "Technology Transfer Agreement")
pursuant to which Party B will (a) license the Technology to the JV (as defined
in the Technology Transfer Agreement); (b) agree to sell to the JV its
requirements of AE (as defined below); and (c) agree to sell to the JV its
requirements of JV Products and bulk Calcitonin until such time as the JV can
manufacture such JV Products and Calcitonin at the JV Facility, all in
accordance with the terms and conditions of the Technology Transfer Agreement.
CHAPTER IV PURPOSE, SCOPE AND SCALE OF OPERATION
ARTICLE 10. In the spirit of strengthening economic cooperation and
technological exchanges, the purpose of the JV is to use advanced technology and
scientific operational management expertise to carry out the manufacture of
pharmaceutical-grade recombinant salmon calcitonin (the "Calcitonin") in
injectable and nasal formulations (the "JV Products"), using the processes of
Party B that include the use of an amidating enzyme that the JV will purchase
from Party B (the "AE") in accordance with the Technology Transfer Agreement,
and the distribution and sale of JV Products in the PRC and such other regions
as decided by the Board of Directors of the JV (the "Territory") in order to
obtain a satisfactory return on investment for all parties and to build up
competitiveness in both domestic and international markets (collectively, the
"JV Business").
ARTICLE 11. The business scope of the JV is (a) to construct, equip, own,
manage, and operate a manufacturing facility in the PRC that complies with all
regulations and guidelines applicable
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to such a manufacturing facility ("Applicable Regulations") and that has the
capacity to manufacture Calcitonin in accordance with the terms and conditions
of the Contract (the "JV
*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
Facility") and prepare, fill, label and package injectable and nasal
formulations thereof; and (b) to market, distribute and sell the JV Products in
the Territory.
ARTICLE 12. In order to fully utilize the time necessary for construction of the
JV Facility and nurture the market for the JV Products, the production and
operation of the JV shall be carried out in two (2) phases, which are as
follows:
Phase I: The JV shall import finished JV Products from Party B and package and
distribute, market and sell such JV Products in the PRC and shall import bulk
Calcitonin from Party B, formulate JV Products therefrom, and distribute, market
and sell such JV Products in the Territory.
Phase II: The JV shall import AE from Party B and manufacture bulk Calcitonin
therefrom, formulate JV Products therefrom, and distribute, market and sell such
JV Products in the Territory.
The JV shall actively explore market opportunities outside the PRC as provided
in Article 31 to accumulate foreign exchange.
ARTICLE 13. Once the JV has begun Phase II, the intended scale of production for
the JV Facility shall be as follows:
13.1 An annual output of *of bulk Calcitonin, as well as JV Products in the
following approximate quantities:
*
13.2 Both parties agree that full consideration shall be given to the
possibility for future expansion during planning, designing and construction.
Proper adjustment will be made to reflect the development of operations and
market changes.
CHAPTER V TOTAL INVESTMENT AND REGISTERED CAPITAL
ARTICLE 14. The total investment of the JV will be *
ARTICLE 15. The registered capital of the JV will be *
Party A shall contribute * in cash for an equity share of 55%;
Party B shall contribute cash and technology valued, in the aggregate, at * for
an equity share of 45%.
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Party A and Party B shall make their respective capital contributions in the
following manner.
*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
15.1 Party A shall contribute the Renminbi equivalent of *, in cash. Such
contribution shall be made as follows:
(a) No later than * after the Establishment Date, Party A shall deposit
the Renminbi equivalent of * in cash into a bank account designated by the JV in
the name of the JV; and
(b) No later than * after the Establishment Date, Party A shall deposit
the Renminbi equivalent of * in cash into a bank account designated by the JV in
the name of the JV.
15.2 Party B shall contribute cash and technology valued, in the aggregate, at
*. Such contribution shall be made as follows:
(a) No later than ninety (90) days after the Establishment Date, Party
B shall deposit Four Hundred Five Thousand US Dollars (US$405,000.00) in cash
into a bank account designated by the JV in the name of the JV;
(b) No later than two (2) years after the Establishment Date, Party B
shall deposit Four Hundred Ninety Five Thousand US Dollars ($495,000.00) in cash
into a bank account designated by the JV in the name of the JV;
(c) Pursuant to the Technology Transfer Agreement, Party A shall
transfer the Technology to the JV, which shall be deemed a contribution valued
at * made upon execution of the Technology Transfer Agreement. All data,
documentation and information required for the Technology transfer must be
provided by Party B according to the terms of the Technology Transfer Agreement
and within two (2) years of the Establishment Date.
15.3 All cash capital contributions shall be denominated in US Dollars. Cash
contribution of Renminbi shall be valued in terms of US Dollars at the official
exchange rate published by the PRC Administration of Foreign Exchange Control
for the purchase of US Dollars with Renminbi on the day payment is made.
ARTICLE 16. Party A shall arrange, on behalf of the JV, such third-party
financing as the JV may reasonably require in connection with the establishment
and operation of the JV , in an amount not to exceed *. Party A shall provide
any guarantees required by the lenders.
ARTICLE 17. In the event that the Board of Directors of the JV unanimously
determines that the JV requires capital in addition to the contributions and
financing provided for in Articles 15 and 16, the Board shall solicit additional
capital contributions from the JV Parties in proportion to the Distribution
Ratios (as defined below) in effect at the time. No JV Party shall have any
obligation to make any such capital contributions. In the event that the
additional capital contributions made in response to such solicitation shall
fall short of the amount of additional capital required by the JV, Party A shall
arrange for third-party financing of the shortfall, provided, however, that such
financing shall be sought only in extraordinary circumstances and
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only with the prior unanimous written approval of the Board of Directors. No
capital increase after the establishment of the JV shall impact the Distribution
Ratio of any JV Party. All financial loans by the JV shall be guaranteed by
Party A, as set forth in Article 16.
CHAPTER VI RESPONSIBILITIES OF CONTRACT PARTIES
ARTICLE 18. In addition to any other express obligations of either JV Party
under this Contract, the Articles of Association or the Technology Transfer
Agreement, the responsibilities of Party A and Party B shall include the
following:
18.1 Party A shall, at its sole cost and expense:
(a) Offer support to the JV not inferior to other substantially similar joint
ventures in which Party A is currently engaged or will be engaged in the
future;
(b) Prepare the feasibility study concerning the JV Business, providing Party B
with an English translation thereof, and submitting the feasibility study
to the appropriate PRC government authorities after Party A and Party B
have jointly agreed on the text thereof;
(c) Obtain all licenses and approvals necessary, and render all necessary
assistance, (i) for the establishment of the JV as a legal person with
limited liability; (ii) for the establishment of the JV Facility; (iii) for
the manufacture and marketing of the JV Products in the PRC; (iv) for the
purchase of AE by the JV from Party B; and (v) to enable the JV to secure
sufficient foreign exchange for the payments to be made to Party B by the
JV and to enable Party B to repatriate such amounts;
(d) Endeavor to entitle the JV to all the preferences granted under Chinese
laws including but not limited to taxation and market promotion
preferences, and ensure to the greatest extent possible that the JV
qualifies for (i) such "tax holidays" and other most favorable tax
treatment as may be available to foreign investment enterprises from time
to time, and (ii) a tax rate (without regard to the tax holiday) that is
not greater than the most preferential income tax treatment available to
foreign investment enterprises in the region;
(e) Transfer to the JV, and arrange any other formalities with the Land
Department related to, the land use right for the JV Facility, contract for
the design and construction of the JV Facility and purchase all equipment
and other materials needed for the production of the JV Products;
(f) Assist the JV Facility in building, validating and operating the JV
Facility in full compliance with all Applicable Regulations and in causing
the JV Facility to be fully operational under such Applicable Regulations;
(g) Assist the JV in arranging adequate supply of water, electricity and
transportation and other infrastructure facilities;
(h) Facilitate the acquisition and staffing of the JV with local Chinese
managers, technicians, workers and other types of workforce;
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(i) Facilitate entry visas, work permits and other travel formalities for
foreign staff of the JV and Party B;
(j) Assist the JV in developing a national network for the distribution of JV
Products in the PRC, including, without limitation, developing effective
marketing plans and strategies for each of the JV Products, securing
suitable advertising for the JV Products, and generally promoting the
market for the JV Products; and
(k) Perform other matters entrusted to Party A by the JV.
18.2 Party B shall, at its sole cost and expense, except as otherwise expressly
provided:
(a) Offer support to the JV not inferior to other substantially similar joint
ventures in which Party B is currently engaged or will be engaged in the
future;
(b) Provide the JV with bulk Calcitonin and AE necessary for the production of
Calcitonin at the cost defined in the Technology Transfer Agreement;
(c) Provide technical guidance and assistance with respect to the Technology
and with respect to equipment installation, testing and validation for
Phase II production, as set forth in the Technology Transfer Agreement;
(d) Facilitate entry visas to the United States for employees of Party A and
the JV;
(e) Provide training to the technicians and workers of the JV with respect to
the Technology, as set forth in the Technology Transfer Agreement;
(f) Transfer the Technology, which shall meet the designed capacity and quality
requirements defined by the Technology Transfer Agreement;
(g) Assist the JV in developing an international network for the distribution
of JV Products in areas in the Territory but outside the PRC, including,
without limitation, developing effective marketing plans and strategies for
each of the JV Products, securing suitable advertising for the JV Products,
and generally promoting the market for the JV Products; and
(h) Perform such other matters entrusted to Party B by the JV and accepted by
Party B.
CHAPTER VII TECHNOLOGY CONTRIBUTION
ARTICLE 19. For the purposes of the JV Business, Party A and Party B agree that
Party B will provide advanced technology including product designs,
manufacturing processes, testing methods, material recipe, quality standard and
training as set forth in the Technology Transfer Agreement.
ARTICLE 20. Party B agrees to provide certain guarantees regarding the
Technology.
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*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
1. Provided that the JV constructs and operates the JV Facility, and
manufactures the Calcitonin and the JV Products, all in strict conformance
with the requirements, specifications, Technology and training provided by
Party B from time to time and as set forth in the Technology Transfer
Agreement, Party B will guarantee, as set forth in the Technology Transfer
Agreement: (A) that the Technology is identical to that in use by Party B
in manufacturing the JV Products on a commercial basis at the time when the
Technology Transfer Agreement enters into force; (B) that the Technology is
suitable for the achievement of the JV's business purpose; (C) that the
Technology is suitable for the achievement of the product quality and
production capacity required by this Contract.
2. Party B will provide the JV with the Technology.
3. Party B will provide the JV with a list of the Technology and technical
assistance calculated as capital contribution.
4. Party B will promptly deliver the designs, technical know-how and other
detailed materials as part of the Technology, as required by the Technology
Transfer Agreement.
5. Party B will contribute its proprietary Technology for the production of
Calcitonin.
6. Party B will guarantee that it is not aware of any current legal disputes
in any format affecting its use of the Technology in the PRC, or of any
infringement by its proposed use of the Technology in the PRC on any third
party patent or intellectual property rights. If Party B fraudulently
concealed such legal disputes or infringement, Party B shall be liable for
damages thus caused to Party A or the JV.
ARTICLE 21. In the event that the JV constructs and operates the JV Facility,
and manufactures the Calcitonin and the JV Products, all in strict conformance
with the requirements, specifications, Technology and training provided by Party
B from time to time and as set forth in the Technology Transfer Agreement, but,
as a result of fraudulent concealment on the part of Party B in not providing
the Technology in accordance with the Technology Transfer Agreement, the
Technology fails to reach the originally designed capacity set forth in the
Technology Transfer Agreement, Party B shall be liable for the damages to the JV
as set forth in the Technology Transfer Agreement.
ARTICLE 22. Party B is free from responsibility for damages to the JV that
result, in whole or in part, from non-compliance with the requirements,
specifications, Technology, training, guidelines and standards provided to the
JV by Party B with regard to the construction and operation of the JV Facility
and the manufacture of Calcitonin and the JV Products.
ARTICLE 23. The Technology is regarded as conforming to the contract
specifications if it can meet the technical indexes listed by Party B for *
batches after the Technology is officially put into trial operation, which will
be jointly confirmed by representatives from Party A, Party B and the JV.
ARTICLE 24. Both Party A and Party B are under the obligation to keep the
Technology confidential in accordance with the Confidentiality Agreement between
the parties dated October 29, 1998.
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*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
ARTICLE 25. Party A and the JV shall not provide in any format to any third
party the Technology after Party B has provided the Technology to the JV unless
unanimously agreed by the JV Board. Party B shall not transfer the Technology to
any third party in the Territory after the Establishment Date.
ARTICLE 26. The JV will have access to improvements to the Technology developed
by Party B after Party B has provided the Technology to the JV to the extent
permitted by, and on the terms and conditions provided in, the Technology
Transfer Agreement.
ARTICLE 27. The JV shall be entitled to any new improvements developed through
its own efforts on basis of the Technology. No party shall use or transfer or
release any such new technology to any third party without the permission of the
JV. Party B shall have a right to use such improvements outside the Territory in
accordance with the Technology Transfer Agreement.
ARTICLE 28. The JV has right of first refusal to other products independently
developed by Party B for use in the PRC. New products developed by the JV shall
belong to the JV, shall be considered JV Products, and Party B shall have a
right of first refusal to such products outside the Territory. If the new
products developed by the JV entail the use of AE, Party B or its successor
shall provide the JV's AE requirements for such new products under the terms of
the Technology Transfer Agreement provided there is no conflict with any
obligation of Party B.
ARTICLE 29. Without the written permission from the other party after the
establishment of the JV, neither Party A nor Party B as well as their
subsidiaries and assignees shall independently or jointly with any third party
manufacture, distribute JV Products in the Territory.
ARTICLE 30. Party B shall be the exclusive source of AE for the JV and the JV
shall purchase all of its requirements of AE from the JV. The JV shall not sell
AE.
CHAPTER VIII SALES OF PRODUCTS
ARTICLE 31. The goal of the JV is to optimize return on investment for all
parties. The JV Products shall be sold inside the PRC and may be sold in
countries outside the PRC in the best interest of the JV, to the extent
expressly authorized by the unanimous approval of the Board of Directors. If the
Board authorizes the JV to sell the JV Products outside the PRC, the JV shall
ensure that the ratio of export sales v. domestic sales shall be * Adjustment
will be made to such ratio according to market conditions by the unanimous
approval of the Board of Directors.
ARTICLE 32. The JV shall have the right to use for free in the marketing of JV
Products in the Territory the trademarks of Party A (the "Party A Marks"). Party
A and the JV shall have the right to use certain trademarks of Party B in
accordance with the following:
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*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
1. Subject to the terms and conditions hereof, Party B hereby grants to Party
A a non-exclusive, royalty-free license (without right to sublicense) to
use the trade name "Unigene" as part of the name of the JV, in connection
with the preparation of the feasibility study and related documents,
applications for all licenses and approvals required from PRC governmental
authorities, and ancillary documents in connection with the establishment
of the JV pursuant to this Contract. Such license shall expire
automatically on the Establishment Date.
2. Subject to the terms and conditions hereof, Party B hereby grants to the
JV, effective as of the Establishment Date, (i) a non-exclusive,
royalty-free license (without right to sublicense) to use the trade name
"Unigene" as part of the name of the JV, and (ii) a non-exclusive,
royalty-free license (without right to sublicense) to use the trademarks
"Unigene" and "Fortical" (collectively, the "Party B Marks" and with the
Party A Marks, the "Marks"), solely for the purpose of marketing and
promoting the JV Products in the Territory. Such license shall expire
automatically upon the expiration or termination of the Contract.
3. Party A agrees not to use the trade name "Unigene" for any purpose not
specified in Paragraph 1 hereof, including without limitation, in
connection with its own business. Further, Party A agrees not to use any
trademark, trade name, service name, service mark or business symbol that
is substantially similar to the Marks or so nearly resembles it as to be
likely to cause deception or confusion.
By its ratification of this Contract, the JV agrees (a) not to make use of the
Marks in contravention hereof; and (b) to comply, in its use of the Marks, with
such rules and conditions pertaining to the use thereof as the relevant JV Party
may establish from time to time at its sole discretion. The JV shall report
forthwith to the relevant JV Party any infringement or suspected infringement of
such party's Marks in the Territory which may come to the notice of the JV and,
at the request of such party and to the extent such infringement is related to
the JV's use of the Marks, institute legal action with respect to such
infringement. Upon such JV Party's reasonable request and at the cost and
expense of the JV, the JV shall use its best efforts to prevent or enjoin any
such infringement (to the extent related to the JV's use of the Marks) and to
prosecute any proceedings that may be necessary for such purposes, including
granting permission to such JV Party to institute any such proceedings in the
name of the JV or in the names of such JV Party and the JV. Any damages
recovered in any such proceedings shall be for the account of the JV. The JV
shall use its best efforts to preserve the value and validity of the Marks in
the Territory.
CHAPTER IX BOARD OF DIRECTORS
ARTICLE 33. The Establishment Date is the establishment date of the Board of
Directors.
ARTICLE 34. The Board of Directors is composed of five (5) directors. The Board
shall have one (1) director who shall serve as Chairman and one (1) director who
shall serve as Vice-Chairman. The Chairman shall be selected by Party A and the
Vice-Chairman shall be selected
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*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
by Party B. Three (3) directors will be selected by Party A and two (2) will be
selected by Party B. Each director shall be appointed for a term of four (4)
years, subject to renewal, but may be replaced at any time during his term by
the party that appointed him, upon prior written notice to the other party.
ARTICLE 35. The Board of Directors shall be the highest body of authority over
the JV. It shall decide all major issues concerning the JV, in accordance with
the Articles of Association. The vote of four of the five members of the Board
of Directors (or their duly appointed proxies) shall be sufficient to constitute
action of the Board on all matters except the matters set forth below, as to
which the Board may take action only by unanimous decision of the five (5)
members (or their duly appointed proxies):
1. Approving on an annual basis the operating plan for the JV;
2. Investigating and approving any expenditures by the JV in excess of *;
3. Investigating and approving the obtainment by the JV of all third
party financing;
4. Selecting and approving any foreign country market regions for sale of
the JV Products and determining the ratio of export sales to domestic
sales;
5. Examining and approving the fiscal budget, financial statements and
balance sheets of the JV;
6. Determining and approving the profit allocation and distribution and
the loss offset plan for the JV;
7. Approving any change in the registered capital for the JV;
8. Approving the transfer of the registered capital of the JV to a third
party;
9. Approving any merger, separation, acquisition, dissolution,
liquidation or alteration of the JV;
10. Amending the Articles of Association;
11. Approving the marketing and/or development of products by the JV other
than the JV Products;
12. Approving the transfer, sale or licensing to a third party of any
improvements in technology that belong to the JV or contractually may
be transferred, sold or licensed by the JV; and
13. Other issues of importance so deemed by the Board of Directors.
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ARTICLE 36. The Chairman of the Board of Directors is the legal representative
of the JV.When the Chairman is unable to perform his responsibilities, the
Vice-Chairman shall be authorized to represent the JV.
ARTICLE 37. A Board of Directors' meeting is to be convened at least once per
year. The Chairman of the Board shall convene interim board meetings upon
proposal by two or more directors.
ARTICLE 38. Board meetings shall be conducted both in Chinese and English. All
topics for Board Meetings and all minutes and resolutions from the Board
Meetings shall be written in both Chinese and English language versions, which
shall have equal force. All records of meetings, including without limitation
minutes and resolutions, shall be filed by the JV.
CHAPTER X MANAGEMENT ORGANIZATION
ARTICLE 39. The Board of Directors of the JV shall establish management organs
for the JV, to be responsible for daily operational and managerial work. The JV
shall have one (1) general manager, selected by Party B, and one (1) deputy
general manager, selected by Party A. The term of service for each of the
general manager and the deputy general manager shall be four (4) years, which
term may be renewed through re-appointment by the Board of Directors. The
general manager and the deputy general manager may be removed for cause by the
vote of the Board of Directors and otherwise by the selecting party. Upon
removal of the general manager or the deputy general manager or expiration of
their respective terms without renewal, the party that selected the general
manager or deputy general manager, as the case may be, shall have the right to
select the replacement general manager or deputy general manager, as the case
may be.
ARTICLE 40. The general manager shall carry out various resolutions of the Board
of Directors and organize and lead the daily operation and management of the JV.
The deputy general manager shall assist the general manager in his work.
ARTICLE 41. In the case of engagement in malpractice for private gain or serious
dereliction of duty on the part of the general manager, deputy general managers
or other corporate executives, or for any other reason, they may be dismissed at
any time by resolution of the Board of Directors.
CHAPTER XI PURCHASE OF EQUIPMENT
ARTICLE 42. In the purchases of such items as required machinery, equipment, raw
materials, fuel, parts, means of transport and articles for office use, priority
shall be given to sources located in the PRC, provided that such sources are
capable of providing such supply on terms and conditions, which conditions shall
include without limitation quality considerations, substantially as favorable as
those offered by sources not located in the PRC.
ARTICLE 43. The participation of Party A should not be prevented when Party B is
entrusted by the JV for the purchase of equipment from overseas markets.
CHAPTER XII MANAGEMENT OF LABOR
ARTICLE 44. Matters relating to the staff and workers of the JV such as
recruitment, employment, dismissal, resignation, wages, labor insurance, welfare
benefits, incentive and penalty systems, are to be settled through collective or
individual contracts by the JV and Trade Union following the programs mapped out
by the Board of Directors, in accordance with "The
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PRC Labor Law" and other relevant regulations. Labor Contracts shall be filed
with the local Labor Department.
ARTICLE 45. Matters relating to the recruitment, wage treatment, social
insurance, welfare benefits and standard of travel expenses of high level
managerial personnel are subject to the approval of the Board of Directors.
CHAPTER XIII TRANSFER OF JV RIGHTS
ARTICLE 46. For a period of three (3) years following the Effective Date, no JV
Party shall sell, assign, transfer, convey, pledge, encumber or liquidate
("Transfer") or otherwise cease to be the beneficial owner of any or all of its
rights under this Contract or in its capital contribution in the JV.
ARTICLE 47. Right of First Refusal.
(a) No JV Party shall effect a Transfer of any or all of its rights under
this Contract or in its capital contribution in the JV (collectively, its
"Rights"), after the third anniversary following the Effective Date, except in
accordance with this Article 46. Any JV Party (the "Offeror") that proposes to
Transfer its Rights shall first offer to Transfer such Rights (the "Offer") to
the other JV Party (the "Offeree"), and the Offeree shall have the option to
purchase such Rights, on such terms and conditions as it and the Offeror shall
mutually agree. In the absence of an agreement, the offer price shall be
determined by a valuation expert chosen by lot from a list of the three (3)
largest valuation firms licensed to do business in the PRC within a period of
thirty (30) days beginning with the receipt of the Offeror's written offer to
Transfer its Rights; provided, however, that the Offeree shall have no
obligation to purchase the Rights at such price. The costs associated with
retaining the valuation expert shall be borne by the Offeror.
(b) If the Offeree does not agree to purchase the Rights within thirty (30)
days from the date of receipt of the Offer, the Offeror may offer its Rights to
a third party on the terms and conditions offered to the Offeree. If the Offeror
receives a bona fide offer from a third party (a "Third Party Offer"), the
Offeror shall obtain the from the third party and deliver to the Offeree a
notice in writing, signed by the Offeror and the third party, of the terms
thereof. The Offeree shall then have ten (10) days from the date of receipt of
such notice to accept the Third Party Offer by delivering written notice of
acceptance to the Offeror. Further, the Offeree shall have the right to purchase
such Rights on the terms and conditions set forth in the notice delivered to the
Offeree, except that any Offeree accepting the Offer shall have the right to
substitute equivalent cash for any non-cash consideration included in the Third
Party Offer. A valuation expert chosen by lot from a list of the three (3)
largest valuation firms licensed to do business in the PRC shall determine the
cash value of any non-cash consideration. The costs associated with retaining
the valuation expert shall be borne by the Offeror. If the Offeree does not
accept the Third Party Offer within such ten-day period, the Offeror shall be
free, for a succeeding sixty-day period, to accept the Third Party Offer and
Transfer the relevant Rights accordingly
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*omitted and filed separately with the United States Securities and Exchange
Commission pursuant to a request for confidential treatment.
CHAPTER XIII TAXATION, ACCOUNTING AND AUDITING
ARTICLE 48. The JV shall pay various taxes in accordance with stipulations of
the relevant laws and regulations of the PRC.
ARTICLE 49. Staff and workers of the JV shall pay individual income tax and
income adjustment tax according to the "Individual Income Tax Law of the
People's Republic of China."
ARTICLE 50. The Board of Directors of the JV shall determine the amounts to be
allocated to the reserve fund, the enterprise expansion fund, and the staff and
workers welfare and incentive fund (collectively, the "Three Funds") before any
distribution of profits is made to Party A and Party B. The JV may not make
allocations to such funds (or similar funds) if such allocations exceed, in the
aggregate, * of the after-tax profits of the JV, without the unanimous prior
consent of the Board of Directors.
ARTICLE 51. The profits distributed by the JV to Party B may be repatriated from
the PRC according to Chinese law.
ARTICLE 52. The fiscal year of the JV shall be 1st January through 31 December
each year (the Gregorian calendar year).
ARTICLE 53. The financial and accounting system of the JV shall be formulated
according to, and consistent with, the relevant laws and regulations of the PRC.
All vouchers, accounts, books, statements shall be written in Chinese. All
monthly and annual statements and quarterly reports shall be prepared both in
Chinese and English, with both versions having equal force and effect. The JV
shall render assistance to each party for review of such documents by such
party.
ARTICLE 54. The JV shall keep full and accurate books of account showing all
revenues and disbursements and all assets and liabilities of the JV. Without
limiting the generality of the foregoing, such books of account shall include
the following items:
1. All cash receipts and expenses of the JV;
2. All records of sales, losses and purchases by the JV;
3. The registered capital and liability of the JV; and
4. The timing of registered capital contributions, distributions, changes and
assignment.
ARTICLE 55. The JV shall provide accounting reports in both English and Chinese
to the Board of Directors, each of Party A and Party B, the local tax
authorities and other relevant government agencies on a quarterly and annual
basis, and shall include such information in the reports to each of Party A and
Party B. The JV's management shall provide the annual report of the JV to the
Board of Directors for approval within two (2) months following the end of each
fiscal year.
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ARTICLE 56. An annual audit of the JV's accounts shall be carried out by an
internationally known and recognized accounting firm (registered in the PRC)
appointed by the Board of Directors. The auditor shall submit reports to the
Board of Directors and to the general manager. All costs and expenses incurred
in connection with such annual audit shall be borne by the JV. Party A and Party
B shall each have the right to procure a special audit of the JV's books and
records, provided that the external auditor is from an internationally known and
recognized accounting firm, whose reports shall likewise be submitted to the
Board of Directors and the general manager. The costs and expenses incurred in
connection with such additional audit shall be borne by the requesting party,
unless such audit shall disclose one or more errors in the regular audit
totaling at least one percent (1%) of the aggregate expenses of the JV for such
year, in which case the JV shall bear such costs and expenses. Party A and Party
B may designate duly authorized personnel to inspect, at reasonable business
hours, the books and records of the JV at the expense of such party.
CHAPTER XV PROFITS AND LOSSES
ARTICLE 57. The equity of the JV shall be held by, and the distributions of
profits of the JV shall be made to, the JV Parties in the following proportions:
fifty-five percent (55%) to Party B and forty-five percent (45%) to Party A (the
"Distribution Ratios").
ARTICLE 58. Profit of the JV (calculated after (a) repayment of any loans to
third parties (other than the JV Parties); (b) payment of any and all taxes due
and owing by the JV; (c) satisfaction of losses for any previous years; and (d)
allocations to the Three Funds in accordance with Article 49) (the "JV Profit")
shall be distributed to Party B and Party A annually in accordance with the
Distribution Ratios then in effect, unless the Board of Directors unanimously
determines that no such distribution should be made. Such distribution of JV
Profit shall be made within three (3) months of the end of each fiscal year of
the JV. Distributions to Party A shall be made in Renminbi and distributions to
Party B shall be made in US Dollars.
ARTICLE 59. As set forth in Article 17, the Distribution Ratios shall not be
altered, notwithstanding any capital contributions by any third party or either
JV Party.
ARTICLE 60. Neither JV Party shall be jointly or severally liable for the debts
or obligations of the JV, or for any claim for losses or damages caused by the
JV, except to the extent of its contributions to the JV as provided for in
Article 15 and except to the extent of any third-party financing it guarantees
pursuant to Article 16.
ARTICLE 61. Any payments made by the JV in US Dollars pursuant to this Contract
shall be calculated on the basis of the official exchange rate published by the
PRC Administration of Foreign Exchange Control for the purchase of US Dollars
with Renminbi on the day the payment is due.
CHAPTER XVI REPRESENTATIONS, WARRANTIES AND COVENANTS
ARTICLE 62. General Representations and Warranties.
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62.1 Party A represents and warrants to Party B that it has the authorization
required under the laws of the PRC to execute and deliver this Contract and to
carry out and perform its obligations under the terms of this Contract. Party A
further represents and warrants to Party B that it is a legal person established
and in good standing under the laws of the PRC and registered in Shijiazhuang,
Hebei Province, PRC.
62.2 Party B represents and warrants to Party A that it has all the requisite
legal and corporate power to execute and deliver this Contract and to carry out
and perform its obligations under the terms of this Contract. Party B further
represents and warrants to Party A that it is a corporation established and in
good standing under the laws of the State of Delaware, USA.
ARTICLE 63. Covenants.
63.1 Neither the JV nor Party A shall, directly or indirectly, (a) purchase,
manufacture, distribute or sell bulk (unformulated) calcitonin or products
containing calcitonin other than the JV Products; or (b) use AE for any purpose
other than the manufacture of the JV Products, including, without limitation,
for resale.
63.2 The parties agree that any transaction between the JV and either of the JV
Parties, including any entity directly or indirectly related to either of the JV
Parties, other than transactions expressly contemplated by this Contract or the
Technology Transfer Agreement, shall be at prices, and on other terms and
conditions, that are no less favorable to the JV than those that could be
reasonably obtained by the JV from unrelated third parties on an
arms-length-basis in similar transactions.
CHAPTER XVII TERM OF JOINT VENTURE CONTRACT
ARTICLE 64. The term of this Contract shall be thirty (30) years from the
Establishment Date and for such period thereafter as is agreed by the parties,
unless earlier terminated pursuant to Chapter XX.
ARTICLE 65. Upon the proposal from one party and unanimous approval from the
Board of Directors, the JV may extend the term of the JV by filing an
application for extension of the JV term with the original examination and
approval organ six (6) months before the date of expiration of the JV Term.
CHAPTER XVIII EFFECT OF CONTRACT EXPIRATION OR TERMINATION
ARTICLE 66. Upon the expiration of or termination of this Contract, (a) the JV
shall immediately cease using the Technology and shall return to Party B the
Technology and all other Confidential Information provided by Party B to the JV;
(b) the Technology Transfer Agreement shall terminate; (c) any remaining
inventory of JV Products shall be sold in the Territory; (d) the JV shall cease
using the Marks, and (e) the JV shall be liquidated according to the Law. The
property of the JV remaining after liquidation shall be distributed to the JV
Parties in accordance
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with the Distribution Ratios. Notwithstanding the foregoing, Party B or its
successor shall continue to supply the JV or its successor with AE, provided,
however, that Party B and the JV can agree to commercially reasonable terms with
respect thereto and there is no conflict with any other obligation of Party B
and provided further that Party B shall in no event be obligated to supply AE to
the JV if the Contract was terminated as a result of the JV's breach of the
Technology Transfer Agreement or Party A's breach of this Contract.
CHAPTER XIX INSURANCE
ARTICLE 67. All insurance coverage for the JV shall be arranged with insurance
carrier(s) that operate in the PRC, provided that such insurance carrier(s) are
capable of providing coverage on terms and conditions substantially as favorable
as those offered by sources not located in the PRC. The selection of insurance
company is subject to Board of Directors approval.
CHAPTER XX CONTRACT AMENDMENT, ALTERATION AND TERMINATION
ARTICLE 68. No amendments to the Contract and its appendixes shall be effective
without the prior written agreement of Party A and Party B and the approval from
the original PRC Government examination and approval organization.
ARTICLE 69. In the event that either JV Party is unable to perform the Contract
due to force majeure or inability to continue operation due to continuous severe
losses, the Contract may be terminated by unanimous approval of the Board of
Directors of the JV and approval from the original examination and approval PRC
Government organization.
ARTICLE 70. In the event that any JV Party or the JV fails to perform its
obligations stipulated in this Contract, the Articles of Association or the
Technology Transfer Agreement or repudiates this Contract, the Articles of
Association or the Technology Transfer Agreement, such JV Party or the JV, as
applicable, shall be regarded as unilaterally in breach of this Contract. In
addition to the right to claims for damages, the non-breaching JV Party shall
have the right to terminate this Contract and to file with the original
examination and approval organization for such termination if the breaching
entity does not cure its breach within thirty (30) days of written notice
thereof.
ARTICLE 71. Party B may terminate this Contract, by written notice to Party A
(a) at any time after the first anniversary of the Effective Date, in the event
that no sales of any JV Product have been made, (b) if the Establishment Date
has not occurred within sixty (60) days of the Effective Date, or (c) in the
event that any profits distributed by the JV to Party B may not be repatriated
from the PRC according to Chinese law.
ARTICLE 72. The parties agree that if there is any subsequent enactment of law
or regulation or any subsequent act of governmental authority in the PRC,
including, without limitation, any condition to the approval of this Contract,
that, in the reasonable opinion of Party B, (a) makes performance of this
Contract or a material provision of this Contract impossible for Party B, (b)
materially adversely alters Party B's rights and obligations from those agreed
and contemplated by this Contract, including, without limitation, materially
adversely alters Party B's
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responsibilities or required actions with respect to the JV, or (c) materially
adversely interferes with the benefits contemplated herein to be received by
Party B, including, without limitation, materially adversely alters the
compensation that Party B is due hereunder or under the Technology Transfer
Agreement, Party B's ownership interest in the JV or Party B's participation in
decision-making that affects the JV, the parties shall use their best efforts to
amend this Contract to restore the equitable arrangement intended by the parties
as reflected in this Contract or, if Party B deems in its sole discretion that
there is no mutually acceptable means of accomplishing the parties' original
intent, Party B shall have the right to unilaterally terminate this Contract.
ARTICLE 73. Either JV Party may terminate this Contract by written notice to the
other JV Party in the event that (a) the equipment necessary for fulfillment of
the JV's obligations is not fully operational in accordance with the Applicable
Regulations, including without limitation, not capable of producing Calcitonin
in conformity with the specifications provided by Party B or not capable of
producing the JV Product within a reasonable time period, or (b) the JV has not
received all necessary government approvals to distribute the JV Products in the
PRC within one (1) year of the certification by the relevant PRC authorities
that the facility is operating under Good Manufacturing Practice.
ARTICLE 74. Party A and the JV shall take all measures necessary, which in any
event shall not be less than all reasonable measures, to maintain the
confidentiality of the Technology and other trade secrets or proprietary
information (whether or not reduced to writing) (the "Confidential Information")
provided by Party B to the JV, which obligation shall continue for a period of
five (5) years after the expiration or termination of this Contract. Party A and
the JV shall not disclose such Confidential Information to any third person,
except to their respective designated officers and employees on a need to know
basis, and who prior to such disclosure have been notified of the confidential
nature of the disclosure and have executed a confidentiality agreement having
obligations of confidentiality at least as strict as those set forth in this
Article 73 and a copy of which is promptly provided to Party B. In the event of
any unauthorized disclosure of the Confidential Information by Party A or the JV
or their respective officers, employees, staff or workers, Party B shall have
the right to terminate this Contract by written notice to Party A.
ARTICLE 75. The following provisions of this Contract shall survive the
termination or expiration thereof: Articles 22, 24, 81, 84 and 85, Chapters
XIII, XIV, XV, XXI, XXIII, XXIV and this Chapter XX.
CHAPTER XXI RESPONSIBILITIES OF CONTRACT BREACH
ARTICLE 76. Any party who fails to make timely and adequate capital
contributions pursuant to Chapter V, shall pay the other JV Party an amount
equal to five percent (5%) of such shortfall amount of delay of payment thereof.
The non-breaching party shall also have the right to terminate the Contract
according to Article 69 and shall have a claim for damages from the breaching
party.
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ARTICLE 77. Partial or complete non-performance of the contract and its
appendixes caused by any single party shall be the responsibility of this
defaulting party. In case of shared fault, each party shall be liable to its own
share of responsibility.
CHAPTER XXII FORCE MAJEURE
ARTICLE 78. In the event of such incidents of force majeure as earthquake,
hurricane, flood, war and other unpredictable incidents whose inception and
consequence are unpreventable, which result in the difficulty or inability to
perform the Contract under the agreed conditions, the party who is affected by
the force majeure incidents shall promptly fax notice to the other party of the
situation and provide valid documents with regard to the details of the incident
and causes for the nonperformance or partial nonperformance or prolonged
performance of thc Contract. In consideration of the extent of impact on the
Contract performance, both parties will discuss and decide on whether to
dissolve the Contract or partially alleviate the responsibility for
nonperformance, or prolong the Contract performance.
CHAPTER XXIII APPLICABLE LAWS
ARTICLE 79. The establishment, validity, interpretation, performance and dispute
resolution of the Contract is subject to the jurisdiction of the laws of the PRC
and the international rules and treaties that are recognized by China shall be
duly followed.
CHAPTER XXIV RESOLUTION OF DISPUTES
ARTICLE 80. All disputes that arise over the performance or in connection with
the Contract, shall be referred to resolution through friendly discussions by
both parties. If friendly discussions are ineffective, disputes shall be
submitted to arbitration before the Stockholm Chamber of Commerce applying the
rules and procedures of International Chamber of Commerce. The arbitration
awards shall be final and binding on both parties. The fees and expenses
involved in the arbitration shall be borne by the losing party.
ARTICLE 81. In the course of arbitration, with the exception of matters in
dispute, both parties shall continue to perform the Contract.
CHAPTER XXV LANGUAGES
ARTICLE 82. The Contract is written with 8 copies both in Chinese language and
English language. Both versions shall have equal validity.
CHAPTER XXVI MISCELLANEOUS
ARTICLE 83. The contract, addenda and appendices including the Articles of
Association, import list, sales agreement and the Technology Transfer Agreement,
all constitute an inseparable part of this Contract.
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ARTICLE 84. This Contract and its addenda and appendixes shall enter into force
upon the approval by National Administration of High and New Technology
Industrial Development Zone, Shijiazhuang, Hebei Province.
ARTICLE 85. All notices or other communications that are required or permitted
hereunder shall be in writing and delivered personally, sent by telecopier (and
promptly confirmed by personal delivery, registered or certified mail or
overnight courier), sent by internationally-recognized courier or sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Party A, to:
Shijiazhuang Pharmaceutical Group Company, Ltd.
276 Zhongshan West Road
Shijiazhuang, Hebei Province, PRC
Attention: Mr. Cai Dong Chen
Telecopier: 0086-311-703-9608
with a copy to:
-----------------------------------
-----------------------------------
Attention:
------------------------
Telecopier:
-----------------------
If to Party B, to:
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, New Jersey 07004, USA
Attention: Dr. Warren Levy, President
Facsimile: 001-973-227-6088
with a copy to:
Covington & Burling
601 California Street, Suite 1900
San Francisco, CA 94108, USA
Attention: James C. Snipes, Esq.
Facsimile: 001-415-591-6091
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (a) when delivered, if
personally delivered on a business day, (b) on the business day
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after dispatch, if sent by facsimile (with confirming copy sent by international
express courier), (c) on the third business day after dispatch, if sent by
internationally recognized courier, and (d) upon receipt, if dispatched by mail.
It is understood and agreed that this Article 84 is not intended to govern the
day-to-day business communications necessary between the parties in performing
their duties, in due course, under the terms of this Contract.
ARTICLE 86. Neither the JV nor Party B shall be responsible for compensating any
brokers or intermediaries involved in helping to establish the JV.
ARTICLE 87. This Contract is signed by representatives of Party A and Party B on
June 15, 2000.
Party A:
/s/Cai Dong Chen
--------------------------------------------------------
Cai Dong Chen
Legal Representative
SHIJIAZHUANG PHARMACEUTICAL GROUP COMPANY, LTD
Party B:
/s/Dr. Warren P. Levy
--------------------------------------------------------
Dr. Warren P. Levy
Legal Representative
UNIGENE LABORATORIES, INC.
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