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EXHIBIT 10.17
JOINT VENTURE SHAREHOLDERS' AGREEMENT
Dated August 31, 2000
PARTIES
PHARMAPRINT INC
AND
CAPITAL ALERT
INVESTMENT LTD
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AGREEMENT made the 31 day of August, 2000
PARTIES PHARMAPRINT INC.
of 0000 Xxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 000000,
Xxxxxx Xxxxxx of America ("PARTY A")
AND CAPITAL ALERT INVESTMENTS LTD of PO Box 957, Offshore Incorporations
Center, Road Town, Tortola, British Virgin Islands ("PARTY B")
INTRODUCTION
A. Party A develops, manufactures and markets dietary supplements,
functional foods, and pharmaceuticals derived from natural plant
extracts. Party A's proprietary PharmaPrint(TM) Process technology
enables the precise identification and consistent replication of the
active ingredients from these extracts that are scientifically believed
to provide the desired health benefits.
B. Party B is a company directly or indirectly invested in business
ventures in Hong Kong and other Asia Pacific countries and cities.
C. Party A and Party B have agreed to enter into a joint venture for the
purpose of developing, marketing, and distributing the Products
manufactured under the PharmaPrint(TM) Process technology in the
Territory through the Company.
IT IS AGREED
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
(1) "Agreement" means this document, including any schedule or
annexure to it;
(2) "Annual Program" means a program to carry out the business of
the Company during a financial year and will consist of:
(a) a business plan setting out in reasonable detail the
proposed marketing plans, finance arrangements, capital
expenditures and activities to carry on the business of
the Company during the financial year; and
(b) a budget setting out in reasonable detail an estimate of
the income to be received and the expenses to be
incurred in carrying out that business plan;
(3) "Article" means an article in the Constitution;
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(4) "Auditors" means the auditors of the Company, if any;
(5) "Board" or "Directors" means the board of directors of the
Company meeting as a board in accordance with the Constitution;
(6) "Business Day" means a day that is not a Saturday, Sunday or any
other day which is a public holiday or a bank holiday in the
place where an act is to be performed or a payment is to be
made;
(7) "Commencement Date" means the date specified in Item 1 of the
schedule, or such later date as is agreed in writing by the
Parties;
(8) "Company" means the company the Parties incorporate under clause
2.1;
(9) "Constitution" means the constitution to be adopted by the
Company on or before the Effective Date which shall contain the
terms mentioned in Annexure A and as amended from time to time;
(10) "Director" means a director of the Company from time to time;
(11) "Dispose" includes, in relation to a Share, to enter into a
transaction in relation to the Share (or any interest in the
Share), which results, or will result, in a person other than
the registered holder of the Share:
(a) acquiring any equitable interest in the Share, including
an equitable interest arising from a declaration of
trust, an agreement for sale and purchase or an option
agreement or an agreement creating a charge or other
security interest in the Share;
(b) acquiring any right to receive directly or indirectly
any Dividends payable in respect of the Share;
(c) acquiring any rights of pre-emption, first refusal or
like control over the disposal of the Share;
(d) acquiring any rights of control over the exercise of any
voting rights or rights to appoint Directors attaching
to the Share; or
(e) otherwise acquiring legal or equitable rights against
the registered holder of the Share which have the effect
of placing the person in the same position as if the
person had acquired a legal or equitable interest in the
Share itself;
(12) "Dividend" includes a bonus distribution in specie or in cash;
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(13) "Effective Date" means the date specified in Item 2 of the
schedule, or such other date as is agreed in writing by the
Parties;
(14) "Encumbrance" means any mortgage, pledge, lien, hypothecation,
charge or other form of security interest or interest in the
nature of a security interest;
(15) "Initial Annual Program" means the Annual Program for the period
from the Effective Date and ending on 30 June 2001 to be agreed
by the Parties in accordance with clause 3.1;
(16) "Initial Directors" means the persons named in clause 22.2;
(17) "Licence and Distribution Agreement" means the agreement to be
made between Party A, a company incorporated under the laws of
Delaware, USA, and the Company pursuant to which Party A grants
the Company the license and right to use the PharmaPrint(TM)
Process technology and to manufacture, distribute and market the
Product manufactured by using the PharmaPrint(TM) Process
technology in the Territory, substantially in the form of the
document in Annexure B;
(18) "Loans" includes, in relation to loans to the Company made by a
Shareholder which is a body corporate, loans to the Company made
by any Related Company of that Shareholder;
(19) "New Company Name" means "Kingsway PharmaPrint Asia Limited" or
such other name determined by the Parties;
(20) "Operative Agreements" means all agreements that are exhibits to
this Agreement and such other agreements that the Parties enter
into for the purpose of fostering the Company.
(21) "Party" means a party to this Agreement and includes a person
who executes a deed agreeing to become bound by the terms of
this Agreement;
(22) "Product" means the dietary supplements, functional foods and
pharmaceuticals derived from natural plant extracts produced by
using the PharmaPrint(TM) Process technology;
(23) "Related Company" in respect of a company means its Subsidiary,
its Holding Company or another company within the same Group of
Companies as the first mentioned company;
(24) "Share" means a share of the Company's capital stock;
(25) "Shareholder" means a Party who holds Shares from time to time;
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(26) "Share Subscription Agreement" means the agreement between Party
A and Party B pursuant to which Party B shall purchase that
number of shares of Party A's capital stock for the purchase
price set forth in such agreement.
(27) "Subsidiary", "Holding Company" and "Group of Companies" each
has the same meaning as in section 2 of the Companies Ordinance
(Cap.32)-
(28) "Territory" means the territory described in Item 6 of the
schedule.
1.2 INTERPRETATION
(1) Reference to:
(a) one gender includes the others;
(b) the singular includes the plural and the plural includes
the singular;
(c) a person includes a body corporate;
(d) a Party includes the Party's executors, administrators,
successors and permitted assigns;
(e) a statute, regulation or provision of a statute or
regulation ("Statutory Provision") includes:
(i) that Statutory Provision as amended or
re-enacted from time to time; and
(ii) a statute, regulation or provision enacted in
replacement of that Statutory Provision; and
(f) money is to United States dollars, unless otherwise
stated.
(2) "Including" and similar expressions are not words of limitation.
(3) Where a word or expression is given a particular meaning, other
parts of speech and grammatical forms of that word or expression
have a corresponding meaning.
(4) Headings are for convenience only and do not form part of this
Agreement or affect its interpretation.
(5) If an act must be done on a specified day which is not a
Business Day, the act must be done instead on the next Business
Day.
1.3 PARTIES
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(1) If a Party consists of more than 1 person, this Agreement binds
each of them separately and any 2 or more of them jointly.
(2) An obligation, representation or warranty in favor of more than
1 person is for the benefit of them separately and jointly.
(3) A Party which is a trustee is bound both personally and in its
capacity as a trustee.
INTRODUCTORY MATTERS AND CONDITIONS PRECEDENT
2. ESTABLISHMENT OF COMPANY
2.1 On or before the Effective Date Party A and Party B must procure:
(1) the incorporation in the British Virgin Islands of a company
with the New Company Name;
(2) the adoption by the Company of the Constitution;
(3) the appointment of the Initial Directors at a duly authorised
meeting; and
(4) the allotment to Party A and Party B of the Shares.
2.2 Unless otherwise decided by the Board:
(1) the Auditors are PricewaterhouseCoopers;
(2) the company secretary is Xxxx Xxx & Associates Limited, a
company incorporated under the jurisdiction of Hong Kong; and
(3) the financial year of the Company commences on 1 July of each
year and terminates on 30 June of the following year.
2.3 Party A and Party B must take steps commercially reasonable for the
Company to commence operations on or before the Effective Date.
2.4 The Board must decide upon the following no later than 3 months after
the signing of this Agreement
(1) management structure;
(2) marketing strategy;
(3) staffing levels;
(4) funding requirements;
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(5) accounting/administration procedures;
(6) electronic data and document processing;
(7) bankers and insurers;
(8) premises from which the Company operates; and
(9) adoption of the Initial Annual Program.
3. CONDITION PRECEDENT TO THE EFFECTIVE DATE
3.1 The Licence and Distribution Agreement must have been entered into
between Party A and the Company.
3.2 The Share Subscription Agreement must have been entered into between
Party A and Party B.
PURPOSE OF THE JOINT VENTURE COMPANY
4. PURPOSE
4.1 The purpose of the Company is:
(1) manufacture, distribute, enrol and market the Product in the
Territory as provided by Party A;
(2) to consider the viability of further joint operations; and
(3) to undertake any future developments and operations which are
economically viable and which are agreed by the Board and within
the purposes of the Company.
CONTRIBUTIONS TO JOINT VENTURE
5. CONTRIBUTIONS TO SHARE CAPITAL OF THE COMPANY
5.1 On or before the Effective Date Party A shall have made initial capital
contributions to the Company consisting of United States of America
Dollar Five Hundred Thousand (US$500,000), the technology contributions
contemplated by the Licence and Distribution Agreement, and have entered
into the Operative Agreements, including, without limitation, the Share
Subscription Agreement, in exchange for the number of Shares set out in
Item 3 of the Schedule. The transfer of funds pursuant to this clause
5.1 shall occur without any further action on the part of Party A upon
the execution of this Agreement, the License and Distribution Agreement
and the investment (the "Investment") by Party B in Party A pursuant to
the Share Subscription Agreement.
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Party A acknowledges and authorizes the transfer to the Company of funds
from the Investment held on Party A's behalf in any escrow or trust fund
necessary to make the capital contribution described in this clause 5.1.
5.2 On or before the Effective Date Party B must have agreed to contribute
the local knowledge, office space, necessary personnel and support
services to the Company for a period of one (1) year from the Effective
Date, and have entered into the Operative Agreements, including, without
limitation, the Share Subscription Agreement, in return for the
allotment of the number of fully paid-up Shares set out in Item 4 of the
schedule.
5.3 Immediately after the Effective Date the authorised and paid up capital
of the Company must be the amounts set out in Item 5 of the schedule.
5.4 Except as set forth in Clauses 5.1 and 5.3 above, no Party shall be
required to make any additional capital contribution to the Company. In
the event the Company makes a request for capital contributions in
excess of the amount set forth in Clauses 5.1 and 5.2 above, each Party
shall have a pre-emptive right to participate in such capital
contribution up to its pro rata portion to avoid dilution. If a Party
declines to fund its pro rata portion of such capital contribution
within thirty (30) days of notice of such capital contribution, the
other Party or third parties may purchase such shares in the Company's
sole discretion.
6. LEGAL AND ESTABLISHMENT COSTS
6.1 The Company must pay:
(1) all legal costs and statutory charges incurred in connection
with the incorporation of the Company and the preparation and
execution of all documents (other than this Agreement and the
Operative Agreements) required for the joint venture and the
establishment of the Company ("Legal Costs"); and
(2) all other costs relating to the establishment of the joint
venture which the Board resolves, prior to the Effective Date,
are payable by the Company ("Establishment Costs").
7. FURTHER FINANCING
7.1 Party B may undertake to provide to the Company any further finance or
to severally guarantee loans to the Company from third parties which the
Company reasonably requires by way of working capital. The further
finance may be provided only as resolved by the Board.
7.2 Further financial requirements of the Company may be provided by way of:
(1) additional capital subscribed by Party B;
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(2) Loan from Party B; or
(3) overdraft or other borrowing or financial accommodation from
third parties;
only as resolved by the Board.
7.3 Any Loan provided by a Shareholder must be on arm's length commercial
terms.
8. GUARANTEES AND INDEMNITIES
If any Shareholder Disposes of all its Shares to any of the other
Shareholders the Shareholders acquiring those Shares must use all
reasonable endeavors to obtain the release of the Disposing Shareholder
from any guarantees and indemnities given under this Agreement or with
the written consent of the Shareholders in respect of any of the
liabilities or obligations of the Company to third parties and pending
the obtaining of that release must keep the disposing Shareholder fully
and effectively indemnified against any liability under the guarantees
or indemnities.
9. EXPERTISE - PARTY A
In furtherance of the purpose of the Company Party A and its Related
Company must bring to the Company:
(1) expertise and know-how in respect of the development,
manufacture and marketing of the Product;
(2) knowledge, expertise and experience in the pharmaceutical
business; and
(3) knowledge and experience in the registration of patent rights
related to the Product in the U.S. and in the Territory.
10. EXPERTISE - PARTY B
In furtherance of the purpose of the Company, Party B must bring to the
Company:
(1) knowledge, expertise and experience in the marketing and
distribution business;
(2) expertise in the management of a company engaged in the
marketing and distribution business;
(3) knowledge and expertise concerning the market in the Territory,
the customs of the people and its ability to service those
people.
SEPARATE RELATIONS OF SHAREHOLDERS TO COMPANY
11. DEALINGS OF SHAREHOLDERS WITH COMPANY
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11.1 The Shareholders must use their best endeavors to ensure that they and
any Related Bodies Corporate give and are given every opportunity to do
business with the Company on a commercial basis.
11.2 The Shareholders must use their best endeavors to ensure that the
operation of the Company is supported by those activities over which
they have control through ownership, affiliation, association or
contractual arrangements. However, nothing in this clause 11.2 abrogates
or limits the rights of a Shareholder to determine the method of
managing its own business.
11.3 In the event the Company undertakes to list its Shares, or the shares of
any Subsidiary, on any public exchange or electronic trading system in
any jurisdiction upon the approval of the Company Board, each Party
shall, and shall cause its officers, directors, employees, agents and
Related Companies to, cooperate fully with all requests of the Company
to effectuate such listing.
12. SHAREHOLDER'S ACCESS TO ACCOUNTS AND RECORDS
After giving at least five (5) Business Days' notice to the Company,
each Shareholder will be entitled to full access during the Company's
normal business hours through an accountant, agent or employee of that
Shareholder and at that Shareholder's cost to inspect all the books,
accounts, records and facilities of the Company for the purpose of
auditing, valuing the company or any other reasonable purpose.
13. PROTECTION OF BUSINESS OF COMPANY
So long as this Agreement continues and until a date twelve (12) months
following the termination of the Company and its Subsidiaries, or
following the date on which any Party ceases to be a Party pursuant to a
Disposal hereunder, pursuant to the terms of this Agreement, the
Shareholders and any Related Company of a Shareholder must not within
the Territory:
(1) participate, assist or otherwise be involved or concerned,
directly or indirectly, in any capacity in any business which is
substantially similar to or competitive with the business of the
Company; or
(2) own or control, directly or indirectly more than 10% of the
shares or other securities, other than on a passive basis, of a
corporation or trust any part of whose business is substantially
similar to or competitive with, the business of the Company.
14. MARKETING RIGHTS
14.1 Subject to the Licence and Distribution Agreement, as from the Effective
Date the Company is the exclusive and perpetual distribution agent for
Party A in the Territory for its Product.
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14.2 If for any reason the Product is being distributed in the Territory by
Party A or any licensee of Party A other than through the Company or its
Related Company, the Company shall be entitled to receive the royalty or
benefits out of such distribution received by Party A. Nothing herein is
intended to limit any other remedy available to the Company under this
Agreement, the License and Distribution Agreement or applicable law.
14.3 During the Term of this Agreement, Party A agrees to negotiate in good
faith any offers by the Company or its sublicensees to enter into an
agreement granting the Company or such sublicensee a license to
distribute the Products in jurisdictions outside the Territory where the
Company or such sublicensee would pay Party A commercially reasonable
royalties for such distribution rights.
15. MANUFACTURING, MARKETING AND DISTRIBUTION OF PRODUCTS; PATENT
REGISTRATION
15.1 On or before the Effective Date Party A and the Company must enter into
the Licence and Distribution Agreement in respect of the PharmaPrint(TM)
Process technology and Product in the form of the agreement in Annexure
B.
15.2 At the Company's expense and at the direction of the Board, Party A
shall apply to register in each jurisdiction in the Territory any and
all patents held or applied for by Party A in the United States, which
registrations and applications therefore shall constitute Patented
Technology as defined in the License and Distribution Agreement. Party A
shall provide reasonable assistance to achieve the registration of such
patents in the Territory, including, without limitation, the execution
of any documents necessary to accomplish the intent stated in this
clause 15.2. Upon registration, such patents shall be assigned to the
Company pursuant to the terms of the License and Distribution Agreement.
CONDUCT OF BUSINESS OF COMPANY
16. MANAGERS
16.1 The Board must appoint a chief executive officer who shall be a member
of the Board pursuant to clause 22.1.
16.2 The chief executive officer:
(1) is responsible for the day-to-day business of the Company
subject to the overriding control of the Board;
(2) is responsible for the preparation and execution of the Annual
Program, and for the preparation and timely distribution of
monthly financial statements, quarterly forecasts, profit and
loss statements and statutory accounts; and
(3) recommends to the Board for their approval key staff
replacements or increases.
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16.3 The Board will appoint an initial chief executive officer, at the
recommendation from Party B, at the first meeting of the Board held by
the Initial Directors.
17. FUNCTIONS OF THE BOARD
17.1 The Board is responsible for the overall direction and control of the
management of the Company, the prudent development of the external
public image of the company including all public statements and
announcements and the formulation of the policies to be applied in the
conduct of the Company's business.
17.2 The Board must:
(1) appoint the CEO of the Company;
(2) review and adopt the Annual Program; and
(3) review and approve the monthly financial statements, marketing
reports and other reports of the managers.
17.3 The Board must not assume any obligations or liabilities on behalf of
the Shareholders except as provided by this Agreement.
18. MEETINGS OF SHAREHOLDERS
18.1 Meeting of Shareholders are conducted in accordance with the
Constitution, except as otherwise provided in this clause 18.
18.2 A quorum at the meeting of Shareholders shall be two (2) and shall
consist of a Party A Shareholder and a Party B Shareholder.
18.3 At any meeting of Shareholders:
(1) Party A will exercise 30% of the total votes; and
(2) Party B will exercise 70% of the total votes.
19. PROTECTION OF SHAREHOLDERS
19.1 The Shareholders must exercise their powers in relation to the Company
to ensure that:
(1) the Company carries on and conducts its business and affairs in
a proper and efficient manner and for its own benefit;
(2) the Company transacts all its business on arm's length
commercial terms;
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(3) the Company maintains with a reputable insurer adequate
insurance against all risks usually insured against by companies
carrying on the same or a similar business and for the full
replacement or reinstatement value of all its assets of an
insurable nature;
(4) the Company keeps books of account and makes true and complete
entries of all its dealings and transactions of and in relation
to its business;
(5) the Company provides each Shareholder within 2 weeks after the
end of each calendar month with unaudited management accounts
for the preceding month in a form reasonably acceptable to the
Shareholders;
(6) the Company prepares its accounts on an historical cost basis
and adopts accounting policies which are either consistent with
international accounting standards or those generally accepted
in Hong Kong and agreed between the Shareholders;
(7) the Company prepares accounts in respect of each financial year
which are required by statute and, if required by statute,
procures that such accounts are audited as soon as practicable
and in any event not later than 3 months after the end of the
relevant financial year;
(8) cheques drawn on bank accounts of the Company in excess of
HK$250,000 require the signatures of both a Party A Director and
a Party B Director;
(9) the Company keeps each Shareholder fully informed as to all its
financial and business affairs; and
(10) if the Company requires any material approval, consent or
licence to carry on its business, the Company uses its best
endeavors to obtain and maintain them.
20. SHAREHOLDERS NOT TO INTERFERE
20.1 Subject to clause 20.2 no Shareholder may interfere with the management
or operations of the Company and without limiting the ambit of this
prohibition, no Shareholder has the authority to give directions to any
officers or employees of the Company.
20.2 Nothing in clause 20.1 restricts a Shareholder's ability:
(1) to appoint a person to the Board or to influence the way that
Director votes at a meeting of the Board;
(2) to grant or withhold the Shareholder's approval; or
(3) to vote at a meeting of Shareholders.
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PARTICULAR POLICIES
21. DISTRIBUTION POLICY
21.1 If in respect of any calendar quarter the Company has after tax profits
available for distribution, the Directors must procure that, subject
only to the prudent financial requirements of the Company (including,
without limitation, the reinvestment of profits to further develop the
Company's business), the Company use such profits in the following
order:
(1) set off against any accumulated loss brought forward; and
(2) make maximum distributions by way of Dividend or other means as
agreed, provided always that not more than the legal
distributable amount which is allowed under the relevant laws
and regulations and after setting off or repayment under
paragraph (1) of this clause shall be distributed.
21.2 In deciding whether in respect of any calendar quarter the Company has
profits available for distribution, any Shareholder may procure the
Auditors, if any, to certify the profits available. In giving their
certificate the Auditors act as experts and not arbitrators and their
determination is binding on the Shareholders.
MEETINGS OF DIRECTORS - CRUCIAL DECISIONS
22. DIRECTORS
22.1 The board of directors of the Company shall consist of eight (8)
directors, provided if Xxxxxxxx Xxx is not a director, the board shall
consist of seven (7) directors. Party A shall be entitled to designate
two (2) such directors to the Company and Party B shall be entitled to
designate five (5) such directors, one whom will be the chief executive
officer of the Company. The eighth director shall be Xxxxxxxx Xxx unless
Party A and Party B agree to the contrary. The Directors shall be
appointed and removed in accordance with the Constitution; provided,
however, that Xx. Xxx may be removed from the Board at any time as
agreed by Party A and Party B through their respective directors. Each
of the Parties agrees to cause its designated directors on the Company
Board to act in accordance with the Business Plan.
22.2 The Initial Directors are:
(1) Xxxxxxxx Xxx;
(2) appointed by Party A: Xxxxxx Xxxxxx and Xxxx Xxxxx; and
(3) appointed by Party B: Xxxxxxx Xxx, Xxxxxxx Xxx, Xxxxxx Xxxx,
Hardy Chan and a fifth director that will be designated by Party
B on a later date.
22.3 Despite the provisions of the Constitution:
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(1) no Party A Director can be appointed without the approval of
both parties (which such approval shall not be unreasonably
withheld or delayed); and
(2) a Party A Director may not be removed without the approval of
Party A and a Party B may not be removed without the approval of
Party B.
22.4 Approval may not be unreasonably withheld under clause 22.3 if:
(1) the proposed Director is of a caliber and with qualifications
similar to the Director being replaced or a person continuing as
a Director; and
(2) the Board will continue to be comprised of at least two (2)
Directors appointed by Party A and five (5) Directors appointed
by Party B.
22.5 Each Shareholder must ensure that any Director appointed by it is
familiar with and observes the terms of this Agreement.
22.6 The provisions of clause 22.4 and clause 22.5 apply to any alternate
director.
23. MEETINGS OF THE DIRECTORS
23.1 The Directors must meet monthly or at other times as the Directors
determine.
23.2 The Directors may agree to meet on conference call if it is not possible
to meet otherwise.
23.3 Not less than 10 days' notice of meetings of Directors must be given to
all Directors unless all Directors consent to a shorter period. Notice
may be delivered personally or be given by post, telephone, facsimile or
e-mail.
23.4 An agenda of items of business to be dealt with at the Directors'
meeting must be given to each Director at least 5 days before the time
of the meeting, unless all Directors consent to a shorter period.
23.5 Where the agenda includes any item referred to in clause 25.1, a copy of
the agenda must also be given to each Shareholder at the same time as it
is distributed to Directors.
23.6 The agenda may be delivered personally or given by post, telephone,
facsimile or e-mail.
23.7 A quorum at a meeting of Directors shall be two (2), which shall consist
of at least one (1) Party A Director and one (1) Party B Director.
23.8 Each Director may exercise one (1) vote at a meeting of Directors.
However, if only one (1) Party A Director is present at any meeting of
Directors, that Party A Director may exercise two (2) votes, and if
fewer than five (5) Party B Directors are present at any
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meeting of Directors, the Party B Directors present may between them
exercise five (5) votes.
23.9 Each Shareholder may appoint observers who have the right to be present
at meetings of the Board. At the invitation of the Board, the observers
may speak on any matter being considered by the Board but are not
entitled to vote.
23.10 Copies of the minutes of Board meetings must be delivered to each
Director within a reasonable time after the completion of the meeting to
which the minutes relate.
24. CHAIR OF THE BOARD OF DIRECTORS
24.1 The Directors will elect one of their number as the chair of the Board
from time to time.
24.2 The chair of the Board will not have any casting or additional vote.
25. MATTERS REQUIRING UNANIMOUS DIRECTORS' APPROVAL
25.1 The Shareholders must exercise their powers in relation to the Company
to ensure that except with the prior approval of a resolution of the
Directors passed unanimously by all Directors present and voting
representing Party A and Party B, respectively, the Company does not:
(1) CONTRACTS WITH DIRECTORS OR SHAREHOLDERS
enter into, vary or terminate any contract or arrangement
(whether legally binding or not) with any of its Directors or
any Shareholder or with any Related Company of a Shareholder;
(2) CONTRACTS OUTSIDE ORDINARY COURSE OF BUSINESS
enter into any material contract or arrangement outside the
ordinary course of its business or by which any person would or
might receive remuneration calculated by reference to Company
income or profits;
(3) MAJOR ASSETS
acquire or dispose of any asset (or several assets pursuant to a
single contract) at a purchase or sale price of greater than
US$500,000;
(4) EMPLOYMENT AND DIRECTORS' CONTRACTS
vary the terms of service (including compensation, remuneration
and emoluments) of a Director or senior employee (meaning an
employee whose rate of gross contractual salary is HK$2,000,000
per annum or more) of the Company or, in the latter case,
appoint or dismiss the employee;
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(5) AUDITOR
appoint or remove the auditor to the Company;
(6) EMPLOYEE SCHEMES
enter into any non-statutory death, retirement, life or medical
insurance, profit sharing, bonus, share option or other scheme
for the benefit of the officers or employees of the Company
whose terms materially differ from the terms of such schemes
typically offered by similar companies in the industry;
(7) DISTRIBUTIONS
pay or make any Dividend or other distribution including make
any distribution out of capital profits or capital reserves
except under clause 21;
(8) SUBSIDIARIES AND INVESTMENTS
acquire or make any investment in another company or business or
incorporate any Subsidiary (other than as contemplated by this
Agreement and any of the Operative Agreements);
(9) CHANGE IN BUSINESS
change the nature or scope of its business as carried on for the
time being to a material extent (including cessation) or
commence any new business not being ancillary or incidental to
such business;
(10) PARTNERSHIPS ETC.
enter into any partnership or joint venture with any other
person or merge or amalgamate with any person (other than as
contemplated by this Agreement and any of the Operative
Agreements);
(11) EARLY REPAYMENTS
make any early repayment of any of its indebtedness;
(12) ANNUAL PROGRAM
adopt the Annual Program or depart from the Annual Program in
any manner reasonably considered significant by any Shareholder;
(13) CHIEF EXECUTIVE OFFICER
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appoint or remove the chief executive officer;
(14) CHANGE IN COMPOSITION OF BOARD
increase or decrease the total number of Directors or vary the
proportion of Party A Directors to Party B Directors;
(15) ISSUANCE OF SECURITIES
issue any equity securities or similar interests of the Company
DEADLOCK
26. DEADLOCK
26.1 If a matter is submitted to a meeting of the Board for decision under
clauses 25 and the Board meeting is unable to reach a decision, the
matter must be referred to the chief executive officers of each of the
Shareholders' ultimate Holding Company (or of the Shareholder if it has
no Holding Company) and failing agreement by them within 14 days to the
boards of directors of those Holding Companies (and of a Shareholder
which has no Holding Company). If the boards of directors of the Holding
Companies (and of a Shareholder which has no Holding Company) fail to
agree on the matter within a further period of 30 days a deadlock must
be treated as having occurred in relation to that matter.
26.2 Within 14 days after the deadlock arises a Shareholder ("Offeror") may
make an unconditional offer in writing ("Bid Notice") to sell all its
Shares to the other Shareholder ("Recipient") at the price specified in
the Bid Notice.
26.3 Within 14 days after service of the Bid Notice ("Bid Notice Period") the
Recipient must elect either to accept or reject the offer made by the
Offeror.
26.4 If the Recipient rejects or fails to accept the offer made by the
Offeror within the Bid Notice Period the Recipient must sell and the
Offeror must buy the Shares held by the Recipient unconditionally and at
the same price per Share specified in the Bid Notice.
26.5 Completion of the transfer of Shares must take place on or before the
14th day after the expiration of the Bid Notice Period and after all
necessary consents and approvals have been obtained. At the time of
completion of the transfer the selling party must hand to the purchasing
party transfers of the selling party's Shares executed by the selling
party together with the certificates for those Shares and the purchasing
party must simultaneously hand to the selling party a bank cheque for
the total purchase price.
DISPOSAL OF SHARES
27. DISPOSAL OF SHARES
19
27.1 The restrictions in this clause 27 apply in addition to the restrictions
contained in the Constitution.
27.2 A Shareholder must not Dispose of any of its Shares or Loans (or any
interest in either) except:
(1) by a transfer of its entire undivided legal and beneficial
interest in the Shares and Loans Disposed of; or
(2) in open market transactions after the listing of the Shares on a
public exchange or electronic trading system in any
jurisdiction; or
(3) to a Related Company of the Shareholder.
27.3 The proposed transferee must either:
(1) acquire all the Shares and all the Loans of a Shareholder; or
(2) acquire with Shares of the Shareholder that part of the Loans of
the Shareholder which is in the same proportion to the total
Loans of the Shareholder as the Shares acquired are to the total
Shares of the Shareholder.
27.4 The Shareholders must ensure that before any person (other than a
Shareholder) is registered as a holder of any Share, whether by
allotment or transfer, that person enters into a deed in a form agreed
by the Shareholders by which that person agrees to be bound by the terms
of this Agreement. The Shareholders must ensure that the Company does
not register that person as the holder of any Share until the deed has
been executed. Upon being registered that person must be treated as a
Party to this Agreement.
27.5 The Shareholders must ensure that the Company does not register any
transfer made in breach of this clause 27 and that the Shares comprised
in any transfer so made carry no rights until the breach is rectified.
28. TRANSFER OF SHARES
28.1 A Shareholder wishing to dispose of its Shares ("Transferring
Shareholder") must first offer its Shares ("Offered Shares") in writing
for cash to the other Shareholders specifying the price payable for the
Shares ("Offer Price") and the terms and conditions of the offer. The
Shareholder receiving the offer must accept or reject the offer within a
period of 60 days after receipt of the offer by giving notice of its
acceptance or rejection of the offer to the Transferring Shareholder. If
the offer is not accepted or rejected within 60 days it must be treated
as rejected at the expiry of that time. If the offer is rejected, then
the Transferring Shareholder is entitled, within a further period of 60
days following the rejection, to sell the Offered Shares to a third
person on the same terms and conditions and at a price which must be in
cash and not lower than the Offer Price but the right to sell is subject
to compliance with the conditions in clause 27.
20
DEFAULT
29. MATERIAL BREACH
29.1 In this clause 29 "Material Breach" means any breach of either this
Agreement (including a breach of the warranties in clause 31) or of the
Constitution which is material having regard to all relevant
circumstances including the nature of the relationship between the
Shareholders and the need for each Shareholder to maintain the
confidence of the other, the nature of the breach (and in particular
whether it is intentional, negligent or otherwise) and the consequences
of the breach.
29.2 If at any time a Shareholder ("Defaulting Shareholder") commits a
Material Breach, any Shareholder ("Aggrieved Shareholder") may serve
notice ("Material Breach Notice") on the Defaulting Shareholder
identifying the relevant Material Breach and referring to this clause
29.2. A Material Breach Notice must be served within 60 days after the
Aggrieved Shareholder becomes aware of the relevant Material Breach.
29.3 For the purposes of clause 29.6 a "Relevant Event" occurs if:
(1) the Defaulting Shareholder commits a Material Breach;
(2) the Aggrieved Shareholder serves a Material Breach Notice; and
(3) 30 days has elapsed since the Material Breach Notice was served
and either:
(a) the Material Breach has not been remedied; or
(b) the Material Breach is not capable of being remedied;
except that if:
(4) the Defaulting Shareholder claims that there has not been a
Material Breach;
(5) the Aggrieved Shareholder agrees to the claim being referred to
a named expert; and
(6) the Defaulting Shareholder refers the claim to the expert within
the 30 day period;
a Relevant Event does not occur unless and until the expert determines
that a court of competent jurisdiction would on the balance of
probabilities hold that there was a Material Breach.
29.4 The expert's fees are payable by the Defaulting Shareholder if the
expert advises that a court of competent jurisdiction would on the
balance of probabilities hold that the relevant Material Breach Notice
was valid and otherwise by the other Shareholders.
21
29.5 If the expert advises that a court of competent jurisdiction would on
the balance of probabilities hold that the relevant Material Breach
Notice was valid, then it must be treated as valid for all purposes. If
the expert advises otherwise then the relevant Material Breach Notice
must be treated as void.
29.6 If a Relevant Event occurs, then:
(1) any shareholder may purchase the Defaulting Shareholder's shares
at a price per share determined:
(a) by agreement between the Shareholders; or
(b) if no agreement is reached between the Shareholders
within 14 days from the date of the Relevant Event, by
an independent valuer appointed by a unanimous
resolution of the Board; or
(c) if no valuer is appointed by the Board within 30 days
from the date of the Relevant Event, by the Chief
Executive of the Hong Kong Society of Accountants or his
nominee; or
(2) if the Shares of the Defaulting Party are not purchased by
another Shareholder within the later of 60 days from the date of
the Relevant Event and the valuation determined pursuant to
clause 29.6(1)(b) or 29.6(1)(c), any Shareholder other than the
Defaulting Party is entitled to apply to have the Company wound
up. The right to apply to have the Company wound up shall expire
30 days after such right commences.
WINDING UP OF COMPANY
30. RIGHTS ON WINDING UP OF COMPANY
30.1 On the winding up of the Company:
(1) any business name of the Company must be deregistered;
(2) the Company must surrender the licence of any intellectual
property licensed to it by any Shareholder;
(3) any other arrangements between the Company and Shareholders in
relation to the business and assets of the Company terminate;
(4) each Shareholder must cease as soon as practicable to make any
reference to the other Shareholders (or any Related Company of
any other Shareholder) in any material or advertising published
by it in connection with its business; and
22
(5) the Shareholders are entitled to have full access to the clients
and customers of the Company.
(6) Neither Shareholder will set up business in direct competition
to the other Shareholder during the Joint Venture or within 12
months of winding up the Joint Venture; provided, however, that
the non-Defaulting Party shall have the right to continue the
business of the Company.
ANCILLARY PROVISIONS
31. WARRANTIES
31.1 Each of the Parties represents and warrants to each other Party that it
is a company duly incorporated and validly existing under the laws of
the country of its incorporation and has all requisite powers to own
property and has the necessary power to bind itself in the manner
contemplated by this Agreement and to execute, deliver and perform this
Agreement.
31.2 Each of the Parties represents and warrants to each other Party that it
has performed all corporate actions and received all corporate
authorizations necessary to execute and deliver this Agreement and to
perform its obligations hereunder.
31.3 Each of the Parties represents and warrants to each other Party that
this Agreement has been validly executed and delivered by it and
constitutes the valid, binding and enforceable obligations of it in
accordance with its terms.
31.4 Each of the Parties represents and warrants to each other Party that it
has and shall maintain the power and authority and all material
governmental licenses, authorizations, consents and approvals to be
obtained within its jurisdiction of formation and principal place of
business to own its assets, carry on its business and to execute,
deliver, and perform its obligations under this Agreement.
31.5 Each of the Parties represents and warrants to each other Party that
there are no (A) non-governmental third parties and (B) governmental or
regulatory entities in its jurisdiction of formation and principal place
of business who are entitled to any notice of the transaction, licenses
and services contemplated hereunder or whose consent is required to be
obtained by such Party for the consummation of the transaction
contemplated hereunder.
31.6 Party A acknowledges that Party B has entered into this Agreement in
reliance upon Party A's contribution of its intellectual property
related to the Product (including, without limitation, the Patented
Technology and Licensed Marks, as those terms are defined in the License
and Distribution Agreement). Party A hereby confirms its representation
and warranties in clauses 12.1(f) and (g) of the License and
Distribution Agreement, which are incorporated herein by reference.
23
31.7 Except as set forth in Item 9 of the schedule, each of the Parties
represents and warrants to each other Party that no Person is or will be
entitled to any broker's or finder's fee, or any other commission or
similar fee in connection with any of the transactions contemplated
hereby as a result of any action taken by or on behalf of such Party.
32. THE CONSTITUTION
32.1 The Shareholders agree that the provisions of this Agreement override
the provisions of the Constitution if there is any inconsistency.
32.2 Each Shareholder undertakes with each other Shareholder to:
(1) exercise all votes, powers and rights under the Constitution to
give effect to the provisions and intentions of this Agreement;
and
(2) observe and comply promptly with the provisions of the
Constitution.
32.3 Nothing contained in this Agreement constitutes an amendment of the
Constitution.
32.4 If any provision of this Agreement to be effective needs to be included
in the Constitution, the Shareholders must amend the Constitution
accordingly.
33. CONFIDENTIAL INFORMATION
33.1 In this clause unless the context otherwise requires:
(1) "Approved Purposes" means the purposes of the Company and the
joint venture;
(2) "Confidential Information" means information of every kind:
(a) concerning or in any way connected with:
(i) the joint venture;
(ii) the subject matter of the joint venture;
(iii) the Company;
(iv) any Related Company of the Company;
(v) the Supplying Party; or
(vi) any Related Company of the Supplying Party; or
(b) which is the property of the Company or of the Supplying
Party or any Related Company of the Company or of the
Supplying Party;
24
and which:
(c) is disclosed in writing, orally or by any other means by
the Supplying Party to the Receiving Party or by any
person on behalf of the Supplying Party to the Receiving
Party or an employee, officer or agent of the Receiving
Party; or
(d) comes to the knowledge of the Receiving Party or an
employee, officer or agent of the Receiving Party by any
means;
(3) "Notes" means notes which relate to, summaries and copies of and
extracts from any Confidential Information whether in
documentary, visual, machine readable or other form;
(4) "Receiving Party" means a Shareholder or the Company which
receives Confidential Information; and
(5) "Supplying Party" means a person (including a Party to this
Agreement and the Company) by which Confidential Information is
supplied to the Receiving Party.
33.2 The Receiving Party must:
(1) maintain and take all steps necessary to maintain all
Confidential Information and all Notes in strictest confidence;
(2) ensure that proper and secure storage is provided for the
Confidential Information and all Notes while in the possession
or under the control of the Receiving Party;
(3) take all precautions necessary to prevent accidental disclosure
of any of the Confidential Information or any of the Notes;
(4) not disclose any of the Confidential Information or Notes to any
person other than those of the Receiving Party's employees,
officers and agents who are required to receive and consider the
Confidential Information in the course of (and solely for) the
Approved Purposes;
(5) use Confidential Information and Notes solely for the Approved
Purposes;
(6) not make Notes or allow Notes to be made except as necessary in
connection with the Approved Purposes;
(7) keep a record of what copies have been made of Confidential
Information and of Notes and what Notes have been made and by
whom and supply this information to the Supplying Party on
request;
25
(8) keep confidential the fact that Confidential Information has
been provided by the Supplying Party to the Receiving Party; and
(9) not expressly or impliedly disclose the existence of
Confidential Information or Notes.
33.3 Clause 33.2 does not impose obligations on the Receiving Party
concerning Confidential Information which the Receiving Party proves to
the reasonable satisfaction of the Supplying Party:
(1) at the date of this Agreement is publicly available;
(2) subsequent to the date of this Agreement becomes publicly
available without breach of this Agreement;
(3) the Receiving Party obtained from a third party without breach
by that third party of any obligation of confidence concerning
that Confidential Information; or
(4) was already in the Receiving Party's possession (as evidenced by
written records) when provided by or on behalf of the Supplying
Party.
33.4 It is not a breach of clause 33.2 for the Receiving Party to disclose
Confidential Information which it is obliged by law to disclose to the
person to whom it is disclosed or to the general public, if necessary or
disclosure of Confidential Information in the ordinary course of a
party's business provided such Confidential Information is not
proprietary.
33.5 The Receiving Party must use its best endeavors to cause all of its
employees, officers and agents who receive or have access to
Confidential Information or Notes to observe all of the Receiving
Party's obligations and undertakings contained in this clause 33.
33.6 The Receiving Party must return all documents and other media which
contain Confidential Information and deliver all Notes to the Supplying
Party:
(1) immediately when requested by the Supplying Party to do so;
(2) when the Receiving Party ceases to be a Shareholder;
(3) when the Company goes into liquidation; or
(4) when the joint venture terminates;
whichever is the earliest.
26
33.7 The Receiving Party's obligations and undertakings continue indefinitely
and are not diminished or terminated by the completion or termination
for any reason of this Agreement.
33.8 The Parties must ensure that the Company complies with obligations so
far as is possible identical with those obligations placed upon them by
this clause 33.
34. PUBLIC STATEMENTS
34.1 Except as required by law, court order or public relation purpose
neither Shareholder may issue any statement, confirm, or otherwise
release information to or through any medium for the communication of
information to the public, except with the prior concurrence of the
other Shareholder both as to the content and timing of the release:
(1) concerning the business or affairs of the Company; or
(2) that this Agreement exists.
35. GOOD FAITH
35.1 Each Shareholder must:
(1) give all co-operation and assistance reasonably necessary to make the
operations of the Company successful;
(2) do all things reasonably within its power which are necessary or
desirable to give effect to the spirit and intent of this Agreement and
the Constitution; and
(3) be just and faithful to each other Shareholder.
35.2 No Shareholder may pledge the credit of any other Shareholder.
36. TIME OF THE ESSENCE
36.1 Time is of the essence of this Agreement.
37. NO PARTNERSHIP ETC.
37.1 This Agreement does not create or evidence a partnership or a fiduciary
relationship or the relationship of principal and agent between the
Parties.
37.2 Except as specifically provided in this Agreement no Shareholder may or
has authority to act as agent or representative of or in any way bind or
commit another Shareholder to any obligation.
38. MEDIATION
27
38.1 If a dispute arises in connection with this Agreement, a Party to the
dispute must give to the other Party notice specifying the dispute and
requiring its resolution under this clause 38 ("Notice of Dispute").
38.2 If the dispute is not resolved within 30 days after the Notice of
Dispute is given to the other Party ("Notice Period"), the dispute is by
this clause submitted to mediation. The mediation must be conducted in
Hong Kong.
38.3 If the Parties have not agreed upon the mediator and the mediator's
remuneration within 7 days after the Notice Period:
(1) the mediator is the person appointed by; and
(2) the remuneration of the mediator is the amount or rate
determined by;
the President of the Law Society of Hong Kong ("President") or the
President's nominee, acting on the request of any Party.
38.4 If the dispute is not resolved within 28 days after the appointment of
the mediator any Party may submit the dispute to arbitration pursuant to
clause 46.
38.5 This clause 38 does not prevent any Party from obtaining any injunctive,
declaratory or other interlocutory relief from a court which may be
urgently required.
39. SEVERABILITY
If anything in this Agreement is unenforceable, illegal or void then it
is severed and the rest of this Agreement remains in force.
40. ENTIRE UNDERSTANDING
40.1 This Agreement, the Operative Agreements and the Constitution:
(1) are the entire agreement and understanding between the Parties
on everything connected with the subject matter of this
Agreement; and
(2) supersede any prior agreement or understanding on anything
connected with that subject matter.
40.2 Each Party has entered into this Agreement without relying on any
representation by any other Party or any person purporting to represent
that Party.
41. VARIATION
An amendment or variation to this Agreement is not effective unless it
is in writing and signed by the Parties.
28
42. WAIVER
42.1 A Party's failure or delay to exercise a power or right does not operate
as a waiver of that power or right.
42.2 The exercise of a power or right does not preclude either its exercise
in the future or the exercise of any other power or right.
42.3 A waiver is not effective unless it is in writing.
42.4 Waiver of a power or right is effective only in respect of the specific
instance to which it relates and for the specific purpose for which it
is given.
43. FURTHER ASSURANCE
Each Party must promptly at its own cost do all things (including
executing all documents) necessary or desirable to give full effect to
this Agreement.
44. COSTS
Each Party must pay its own costs and disbursements connected with the
negotiation, preparation and execution of this Agreement and the
Operative Agreements.
45. NOTICES
Any notice required or permitted to be given hereunder shall be in
writing and shall be (a) personally delivered, (b) transmitted by
internationally recognized air courier service, or (c) transmitted by
facsimile, in each case to the parties as follows, as elected by the
party giving such notice, to the other parties at the addresses set
forth on Schedule 1 of this Agreement, or as amended by notice pursuant
to this subsection. Except as otherwise specified herein, all notices
and other communications shall be deemed to have been duly given on (i)
the date of receipt if delivered personally, (ii) three (3) Business
Days after delivery to the courier, or (iii) the next Business Day in
the jurisdiction of the recipient following the date of transmission
with electronic confirmation if transmitted by facsimile, whichever
shall first occur. Any party may change its address for purposes hereof
by notice to the other parties. All notices and other communications
shall be in the English language.
46. GOVERNING LAW AND JURISDICTION; ARBITRATION
46.1 This Agreement shall be governed and interpreted in accordance with the
Laws of Hong Kong Special Administrative Region.
29
46.2 Subject to clause 38 hereof, the Parties agree to submit all disputes
arising out of this Agreement to arbitration in Hong Kong in accordance
with the Model Law on International Commercial Arbitration adopted by
the United Nations Commission on International Trade Law.
47. STRUCTURAL CHANGE, BANKRUPTCY
If there is any bankruptcy or similar filing or proceeding against Party
A, Party B shall have the right to purchase Party A's equity interest in
the Company at a cash purchase price equal to the fair market value of
the Company as of the date such filing or proceeding was instituted.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
SCHEDULE 1
Item 1 COMMENCEMENT DATE [CLAUSE 1.1(7)]
The date of this Agreement is August 31, 2000
Item 2 EFFECTIVE DATE [CLAUSE 1.1(13)]
[ ] 2000
Item 3 NUMBER OF SHARES FOR WHICH PARTY A MUST SUBSCRIBE [CLAUSE 5.1]
300,000 shares
Item 4 NUMBER OF SHARES FOR WHICH PARTY B MUST SUBSCRIBE [CLAUSE 5.2]
700,000 shares
Item 5 AMOUNT OF AUTHORISED AND PAID UP CAPITAL AFTER THE EFFECTIVE DATE
[CLAUSE 5.3]
Authorised capital: 5,000,000 shares with no par value
Paid up capital: 1,000,000 shares of US$500,000 in total
Item 6 TERRITORY [CLAUSE 1.1(25)]
All countries within Asia Pacific including but not limited to Hong
Kong, The People's Republic of China, North and South Korea, Japan,
Singapore, Taiwan, Macau, Indonesia, Malaysia, Thailand, Vietnam, The
Philippines, India, Pakistan, Brunei, Bangladesh, Sri Lanka, Papua New
Guinea and Myanmar, Australia and New Zealand and any other city,
province or country agreed to in writing by the Parties.
Item 7 PARTY A'S ADDRESS FOR SERVICE AND FACSIMILE NUMBER [CLAUSE 45]
Name : PharmaPrint Inc.
Attention : Chief Executive Officer
Address : 0000 Xxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 92660, United States of America
Facsimile No.: 000-000-0000
Item 8 PARTY B'S ADDRESS FOR SERVICE AND FACSIMILE NUMBER [CLAUSE 45]
Name : Capital Alert Investments Ltd
Attention : Xxxxxxx Xxx
Address : x/x 0/X., Xxxxxxxxx Xxxxx, 00 Xxxxxxxx Xxxx
00
Xxxxxxx, Xxxx Xxxx
Facsimile No.: (000) 0000 0000
Item 9 BROKER'S OR FINDER'S FEE [CLAUSE 31.7]
Upon closing, First Consulting Group, Inc. shall receive from Party A a
fee equal to 7% of the advanced by Party A pursuant to Clause 5.1
proceeds and options to purchase up to 500,000 shares of Party A's
common stock over three years at an option price of $0.375. Neither
Party B nor the Company shall incur any obligation to First Consulting
Group, Inc. as a result of the fees described herein.
[SIGNATURE PAGE FOLLOWS]
32
EXECUTED as an agreement.
PHARMAPRINT INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
CAPITAL ALERT INVESTMENT LTD
By:
-----------------------------------
Name:
Its:
33
ANNEXURE A
Constitution of the Company
[clause 1.1(9)]
The name of the Company is "Kingsway PharmaPrint Asia Limited" or such other
name determined by the Parties.
Item 1 The Registered Office of the Company will be situated at P.O. box 957,
Offshore Incorporations Center, Road Town, Tortilla, British Virgin
Islands.
Item 2 The Liability of the Members is limited.
Item 3 The Authorised Share Capital of the Company is 5,000,000 shares with
no par value with the power for the Company to increase or reduce the
said capital and to issue any part of its capital, original or
increased, with or without preference, priority or special privileges,
or subject to any postponement of rights or to any conditions or
restrictions and so that, unless the conditions of issue shall otherwise
expressly declare, every issue of shares, whether declared to be
preference or otherwise, shall be subject to the power hereinbefore
contained.
Item 4 The Company shall be a private company and accordingly the following
provisions shall have effect:
(a) The number of Members for the time being of the Company
(exclusive of persons who are in the employment of the Company,
and of persons, who having been formerly in the employment of
the Company were, while in such employment and having continued
after the determination of such employment to be, Members of the
Company) is not to exceed fifty, but where two or more persons
hold one or more shares in the Company jointly, they shall, for
the purpose of the paragraph, be treated as a single Member.
(b) Any invitation to the public to subscribe for any shares or
debentures or debenture stock of the Company is hereby
prohibited.
(c) The Company shall not have power to issue share warrants to
bearer.
34
ANNEXURE B
Dated the 31st day of August, 2000
PHARMAPRINT INC.
AND
KINGSWAY PHARMAPRINT ASIA LIMITED
LICENCE AND DISTRIBUTION AGREEMENT
35
THIS LICENCE AND DISTRIBUTION AGREEMENT IS MADE THE 31ST DAY OF AUGUST, 2000.
BETWEEN
(1) PHARMAPRINT INC, a company incorporated under the laws of Delaware,
United States of America and having its registered office at 0000 Xxx
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, XX 00000, X.X.X. ("Party A");
and
(2) KINGSWAY PHARMAPRINT ASIA LIMITED, a company incorporated under the laws
of the British Virgin Islands and whose registered office is situate at
P.O. Box 957 Offshore Incorporations Center, Road Town, Tortola, British
Virgin Islands ("Party B").
WHEREAS:
(A) Party A is a company that develops, manufactures and markets dietary
supplements, functional foods and pharmaceuticals derived from natural
plant extracts. Party A is the proprietary owner of the PharmaPrint(TM)
Process technology. The PharmaPrint(TM) Process technology enables the
precise identification and consistent replication of the active
ingredients from the natural plant extracts that are scientifically
believed to provide the desired health benefits.
(B) Party A has entered into a joint venture shareholders' agreement with
Capital Alert Investments Limited, a company incorporated under the laws
of the British Virgin Islands on August 31, 2000 for the formation and
operation of Party B.
(C) Party A has agreed to grant to Party B a licence for the manufacturing,
marketing and distribution of the Product in the Asia Pacific Region as
set forth herein.
NOW IT IS AGREED between the parties as follows:
1. DEFINITIONS
1.1 In this Agreement, unless the context otherwise requires, the following
expressions shall have the following meanings:
"Asia Pacific Region" are countries within Asia Pacific, including but
not limited to, Hong Kong, The People's Republic of China, North and
South Korea, Japan, Singapore, Taiwan, Macau, Indonesia, Malaysia,
Thailand, Vietnam, The Philippines, India, Pakistan, Brunei, Bangladesh,
Sri Lanka, Papua New Guinea and Myanmar, Australia and New Zealand.
36
"Know-How" means Party A's information and manufacturing directions,
drawings, processing information, standards and specifications as to the
materials to be used, control methods and test data necessary to
manufacture Products.
"Patented Technology" means the PharmaPrint(TM) Process technology
itemized on Schedule 1.1 hereto including the modifications and updates
developed by Party A and its Related Company and as further modified
pursuant to clause 16.1. Schedule 1.1 may be amended from time to time
as Party A applies for or is issued additional patents.
"Product" means the dietary supplements, functional foods and
pharmaceuticals derived from natural plant extracts produced by Party B
or any sublicensee, contractor or other third party using the Patented
Technology.
"Related Company" in respect of a company means its Subsidiary, its
Holding Company or another company within the same Group of Companies as
the first mentioned company (as those terms are defined in Section 2 of
the Companies Ordinance (cap. 32)).
"Services" means the provision of access rights, maintenance and usage
of the Patented Technology to third parties, and training programs.
1.2 In this Agreement, unless the context otherwise requires, words
importing a gender shall include every gender and words importing the
singular shall include the plural and vice versa.
1.3 Headings in this Agreement are inserted for convenience only and shall
be ignored in construing this Agreement.
2. LICENCE AND DISTRIBUTION AGREEMENT
2.1 Party A hereby assigns, transfers and sets over to Party B all
right, title and interest to all patents, registrations and/or
applications filed by Party A or its agent in any jurisdiction in the
Asia Pacific Region as set forth on Schedule 1.1 (the "Asia Patents").
Party A hereby grants Party B a non-exclusive (subject to Section 9),
perpetual, royalty-free (except pursuant to Section 5) and fully-paid
license (i) to use, modify, reproduce, display, make, deploy and
otherwise exploit the Patented Technology, Know-How and the associated
intellectual property rights therein in the manufacturing of the
Products, and (ii) to sublicense any of the foregoing rights pursuant to
Section 14 in any jurisdiction in the Asia Pacific Region (collectively,
the "Technology License"), each during the term of this Agreement. Party
A hereby grants Party B an exclusive, perpetual, royalty-free (except
pursuant to Section 5) and fully-paid license (i) to use the Licensed
Marks (as defined in Section 10.2) in the Asia Pacific Region and (ii)
to sublicense any of the foregoing rights pursuant to Section 14 in any
jurisdiction in the Asia Pacific Region (collectively, the "Trademark
License"), each during the term of this Agreement. Party A hereby grants
to Party B an exclusive and perpetual right and license to market,
promote and distribute ("the Distribution Right") the Product in the
Asia Pacific Region on the terms and conditions set out below during the
term of this
37
Agreement. Notwithstanding the foregoing, the Technology License,
Trademark License and Distribution Right granted in this Section 2
(collectively, the "Licenses") shall not include the right to
pharmaceutical discovery or development of any Product which would
require U.S. Food and Drug Administration approval or any similar U.S.
government approval process prior to their sale. Party B hereby grants
to Party A a perpetual, royalty free non-exclusive and fully paid
license to use, modify, reproduce, display, make, deploy and otherwise
exploit the Asia Patents and to sublicense any of the foregoing rights
subject to the limits provided for herein, including, without
limitation, such rights that are granted exclusively to Party B.
3. PRODUCTS AND SERVICES
3.1 The Licences shall include the right to manufacture, market, promote and
distribute the Product manufactured by using the Patented Technology in
the Asia Pacific Region and the right to sublicense the Patented
Technology and Know-How for the manufacture, marketing, promotion and
distribution of Products in the Asia Pacific Region.
3.2 For the avoidance of doubt, Party B shall have the unfettered right
subject to the terms and conditions hereof to lay down the terms and
conditions for the use of the Patented Technology and Services by
customers and charge such fees and conditions as Party B may think fit.
4. CUSTOMIZATION AND LAUNCHING OF SERVICE
4.1 Party B shall have the right to test the Product, by itself or a
qualified person, before the Launch Date to verify that the Product
complies with the legal requirements and standards in the Asia Pacific
Region.
4.2 Party A and Party B shall discuss from time to time the standard of the
Product and seek ways to improve and upgrade the Product.
4.3 Party A shall use reasonable efforts to make all improvements,
modifications, enhancements and updates to the Patented Technology and
Know-How as Party A reasonably considers necessary, but Party B shall
bear and pay all cost for the customization of such improvements,
modifications, enhancements and updates for the Asia Pacific Region
requested by Party B. Party A shall provide an estimated cost prior to
the customization.
4.4 Party A shall provide operating manuals and training to the extent such
exist (including update manuals and training) and technical support
services to Party B and its staff in a timely manner. Party B shall
reimburse Party A for its reasonable costs and expenses associated with
providing such training and services, including, without limitation, the
per diem salary costs of Party A employees providing requested training
and support services and the reasonable expenses for necessary travel.
5. ROYALTY
38
In consideration of the granting of the Licences, Party B agrees to pay
a royalty of 5% of the gross sales of Products and 5% of any other
revenues generated directly or indirectly from the Patented Technology
or Know-How, less reasonable provisions for bad debts computed in
accordance with international accounting standards or those generally
accepted in Hong Kong and agreed between the parties. The royalty is
payable to Party A within 30 days after the end of each calendar quarter
(i.e. no later than April 30, July 30, October 30 and January 30).
6. NAME OF THE PRODUCTS AND SERVICES
The Product shall be launched under "PharmaPrint" or in such other
manner as mutually agreed between the parties.
7. PROMOTION
Party B will promote the Product in Hong Kong and other countries or
cities within the Asia Pacific Region as Party B shall deem appropriate
and as governed by this Agreement.
8. CUSTOMIZATION FOR OTHER ASIAN MARKETS
If requested by Party B, Party A shall customize the Product, within a
time table and costs mutually agreeable to both parties, for other
countries or cities within the Asia Pacific Region in manner as
requested by Party B so as to make the Product suitable for market and
distribution in such countries or cities. Party B shall have the same
right to promote, market and use all such technology and know-how in the
same manner as set out above.
9. EXCLUSIVE AND PERPETUAL RIGHT
9.1 Party B shall have the perpetual, non-exclusive right to use the
Patented Technology and Know-How to manufacture the Product during the
term hereof and the exclusive and perpetual right and license to market
and distribute the Product within the Asia Pacific Region during the
term hereof as provided in Section 2 hereof.
9.2 Subject to the proviso in Section 2 hereof, Party A shall not, and shall
not permit any other person except Party B during the license period to:
(a) license in connection with the sale or distribution of Product,
the Patented Technology and Know-How or similar technology and
know-how to any person or company within the Asia Pacific
Region, or
(b) license in connection with the sale or distribution of Product,
any person or company to use the Patented Technology and
Know-How or any similar
39
technology and know-how developed by Party A or its Related
Companies in the Asia Pacific Region, or
(c) license in connection with the sale or distribution of Product,
any person or company to use the Patented Technology and
Know-How or any similar technology and know-how developed by
Party A or its Related Companies in a way as to compete with
Party B's business in the Asia Pacific Region, or
(d) market and distribute the Product or similar products in the
Asia Pacific Region utilizing the Patented Technology and
Know-How or any similar technology and know-how in a way as to
compete with Party B's business or license any third party to do
any of the same.
9.3 Notwithstanding the foregoing, in the event that any third party (a
"Manufacturing Licensee") will obtain a license to the Patented
Technology, Know-How or similar technology from Party A or its Related
Companies for the manufacture of the Products in the Asia Pacific
Region:
(a) Party A shall provide to Party B prompt written notice of
negotiations with a potential Manufacturing Licensee prior to
the date that Party A and such Manufacturing Licensee enter into
a definitive agreement(s);
(b) The shares of such Manufacturing Licensee's capital stock must
be listed on the New York Stock Exchange or on the Nasdaq
National Market; and
(c) Any definitive agreement between Party A and a Manufacturing
Licensee shall include a provision whereby the Manufacturing
Licensee acknowledges (i) that it has no rights to distribute
Products in the Asia Pacific Region and (ii) that Party B has
the exclusive right to distribute Products in the Asia Pacific
Region.
9.4 Notwithstanding the foregoing, a Manufacturing Licensee may enter into
subcontracts with entities which do not comply with the requirements
contained in Clause 9.3(b) in connection with any such manufacturing
license for the manufacture of the Products in the Asia Pacific Region.
40
10. USE OF PARTY A'S TRADEMARKS AND LOGOS
10.1 Party A has the right to use, adopt, incorporate, show and display the
name of Party A and all trade marks, service marks, business names and
all marks, signs and logos of Party A and its affiliates, including all
names, marks, signs and logos which may in the future be used or adopted
by Party A and its affiliates for or in connection with the Products or
the Services or the promotion or marketing thereof.
10.2 Party B shall during the term hereof have the right to use, adopt,
incorporate, show and display the name of Party A, service marks,
business names and all marks, signs and logos of Party A as exhibited in
Schedule 10.2 and future service marks, business names and all marks,
signs and logos of Party A from time to time ("the Licensed Xxxx") for
and in connection with the Product and the manufacture, promotion and
marketing thereof.
10.3 Party B must not modify or alter the Licensed Xxxx without the prior
written consent of Party A, which consent shall not be withheld
unreasonably where such modification or alteration solely relates to the
use of the logo in any particular country or city in the Asia Pacific
Region in which the Services are provided.
10.4 If any Licensed Xxxx is modified or altered under clause 10.3, the
property in that xxxx shall be the property of Party B and Party A must
assign to Party B all intellectual property rights arising out of the
modification or alteration.
11. QUALITY STANDARDS
11.1 Party A shall establish reasonable quality standards for the Products
and Services provided under the Licensed Marks for the purpose of
protecting the Licensed Marks as provided herein.
11.2 Party B agrees to adopt the quality standards established by Party A
pursuant to Clause 11.1 for the Products and Services provided under the
Licensed Marks as the minimum standard of quality for the Products and
Services.
11.3 Party B shall have the right to create and distribute promotional and
marketing literature and materials for the Products and Services using
the Licensed Marks and materials and content provided by Party A. Party
A shall have the right to control the quality of all promotional and
marketing literature and materials bearing the Licensed Marks and Party
B's use of the Licensed Marks.
11.4 Party A shall use reasonable efforts to promptly inform Party B of all
of their marketing initiatives and advertising campaigns that would be
reasonably likely to significantly affect the Asia Pacific Region for
the Products and Services. Upon request by Party B, Party A shall
provide copies of their advertising and promotional materials to assist
Party B in the development of its own such materials for the Asia
Pacific Region.
41
11.5 Party A shall as soon as reasonably practicable include an appropriate
reference approved by Party B on its internet home page (as well as
certain of its advertising and promotional materials as determined in
Party A's sole discretion) that the Products and Services in relation to
the Asia Pacific Region are being granted and will be available to
customers through Party B.
12. REPRESENTATIONS AND WARRANTIES
12.1 Party A warrants and represents to Party B that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and it has the
corporate power and is authorized under its Certificate of
Incorporation and its Bylaws to carry on its business as now,
and as proposed to be, conducted;
(b) it has performed all corporate actions and received all
corporate authorizations necessary to execute and deliver this
Agreement and to perform its obligations hereunder;
(c) this Agreement has been validly executed and delivered by it and
constitutes the valid, binding and enforceable obligations of it
in accordance with its terms;
(d) it has and shall maintain the power and authority and all
material governmental licenses, authorizations, consents and
approvals to be obtained within the United States to own its
assets, carry on its business and to execute, deliver, and
perform its obligations under this Agreement;
(e) except as set forth on Schedule 12 hereto, there are no (A)
non-governmental third parties and (B) governmental or
regulatory entities in the United States who are entitled to any
notice of the transaction, licenses and services contemplated
hereunder or whose consent is required to be obtained by Party A
for the consummation of the transaction contemplated hereunder;
(f) except as set forth on Schedule 12 hereto, it is the sole and
rightful owner of all right, title and interest in and to the
Patented Technology and the Licensed Marks and all related
intellectual property rights therein or holds adequate licenses
or otherwise holds all rights necessary to use the Patented
Technology and the Licensed Marks and all related intellectual
property rights therein free and clear of all liens, claims and
encumbrances, and it has the unrestricted right to market,
license and exploit the Patented Technology and the Licensed
Marks and all related intellectual property rights therein and
such marketing, licensing and exploitation of the Patented
Technology and the Licensed Marks and all related intellectual
property rights therein will in no way constitute an
infringement or other violation of any patent, copyright, trade
secret, or trademark or other third party rights;
42
(g) except as set forth on Schedule 12 hereto, no claims have been
made in respect of the Patented Technology or Licensed Marks and
any related intellectual property rights therein and no demands
of any third party have been made pertaining to them, and no
proceedings have been instituted or are pending or, to the best
of its knowledge, threatened that challenge the rights of Party
A in respect thereof; and
(h) All services by Party A to Party B will be provided in a
professional, diligent and timely manner using staff
knowledgeable and suitably qualified for the performance of the
respective tasks for which they are responsible and Party A will
use reasonable efforts to ensure that the quality and
reliability of such services are no less favorable to Party B
than the equivalent services provided by Party A it for its own
purposes.
12.2 Party B warrants and represents to Party A that:
(a) it is a company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation;
and it has the corporate power and is authorized under its
Articles and Memorandum of Association to carry on its business
as now, and as proposed to be, conducted;
(b) it has performed all corporate actions and received all
corporate authorizations necessary to execute and deliver this
Agreement and to perform its obligations hereunder;
(c) this Agreement has been validly executed and delivered by it and
constitutes the valid, binding and enforceable obligations of it
in accordance with its terms;
(d) it has and shall maintain the power and authority and all
material governmental licenses, authorizations, consents and
approvals to be obtained in Hong Kong, as necessary, to own its
assets, carry on its business and to execute, deliver, and
perform its obligations under this Agreement;
(e) it is in compliance with all requirements of any Hong Kong, or
to the best of its knowledge, any other law (statutory or
common), treaty, rule or regulation or determination of an
arbitrator or of a governmental authority, in each case
applicable to or binding upon it or any of its property or to
which any of its business related to the Products is subject,
except where failure to be in compliance could not reasonably be
expected to have a material adverse change in, or a material
adverse effect upon, the operations, business, properties or
condition (financial or otherwise) of Party B taken as a whole
(subject to obtaining any special governmental licenses required
in any particular jurisdiction to manufacture, market, promote
and/or distribute the Products);
(f) there are no (A) non-governmental third parties or (B)
governmental or regulatory entities in Hong Kong who are
entitled to any notice of the transactions
43
contemplated hereunder or whose consent is required to be
obtained by Party B for the consummation of the transaction
contemplated hereunder; and
(g) it has the staff, capacity, skill and experience to market and
promote the Service and Products in the Asia Pacific Region.
13. INDEMNIFICATION
13.1 Party A shall defend, indemnify and hold harmless Party B, its Related
Companies and any sublicensees and any of their respective officers,
directors, agents and employees (each a "Party B Indemnified Party")
from and against any damages, liabilities, losses, claims, demands,
judgments, suits, costs and expenses, including but not limited to
reasonable attorneys' fees, if any, suffered or incurred by a Party B
Indemnified Party as a result of any breach of any warranty or
representation given by Party A hereunder, provided that (i) Party A is
promptly notified of any and all threats, claims and proceedings related
thereto, (ii) Party A shall have sole control of the defense and/or
settlement of any claim or proceeding, except that Party A may not enter
into such settlement without Party B's prior written consent thereto,
which shall not be unreasonably withheld, (iii) Party B furnishes to
Party A, upon request, information available to Party B for such
defense, and (iv) Party B provides Party A with reasonable assistance at
Party A's expense.
13.2 Party B shall defend, indemnify and hold harmless Party A and its
Related Companies and any of their respective officers, directors,
agents and employees (each a "Party A Indemnified Party") from and
against any damages, liabilities, losses, claims, demands, judgments,
suits, costs and expenses, including but not limited to reasonable
attorneys' fees, if any, suffered or incurred by a Party A Indemnified
Party as a result of any breach of any warranty or representation given
by Party B hereunder.
14. RIGHT TO SUB-LICENSE
14.1 Party B shall have the exclusive right to sub-license the Patented
Technology, Know-How, Services and Licensed Marks to other persons or
companies as necessary or required to distribute Products in the Asia
Pacific Region. In addition, Party B shall have the exclusive right to
sub-license the Distribution Right of Products to persons or other
companies in the Asia Pacific Region only.
14.2 Any sub-licence granted by Party B:
(a) must expressly acknowledge and bind the sub-licensee to observe
and preserve the rights of Party A granted under this Agreement;
and
(b) must terminate immediately if this Agreement terminates for any
reason whatsoever.
(c) Party B will ensure that the sub-licensee follows the quality
standards set by Party A as per clause 11.1. Party B will
include a clause in its sub-license agreement
44
that specifies compulsory quality compliance as part of the
agreement for the sub-license.
15. PARTY B'S RIGHT OF FIRST REFUSAL
Party A agrees to negotiate in good faith a license agreement with Party
B, prior to negotiating with any third party, for any and all new
technology and know-how developed by Party A or its Related Company or
its joint ventures, its partnerships or similar entities which are not
directly related to or derivative of the Patented Technology and which
does not constitute an update or modification to the Patented Technology
(the "New Technology") for use in the Asia Pacific Region during the
term of this Agreement, provided that no third party or partner of Party
A that has ownership rights or a license to such New Technology (as a
result of its support of the development of such New Technology) objects
to such negotiations.
16. INTELLECTUAL PROPERTY
16.1 To effect the physical transfer and/or operational availability of the
Patented Technology by Party A to Party B, Party A shall provide to
Party B, as soon as reasonably practicable after the Effective Date (and
with respect to any modifications or updates, as soon as reasonably
practical but no later than such modifications or updates are delivered
to Party A's other customers or partners (joint venture or otherwise)),
the Patented Technology in tangible form (including but not limited to
those items described in Schedule 1.1). Party A agrees to undertake and
provide services related to the Patented Technology and Services
pursuant to this Agreement and as further mutually agreed to by the
parties. Party A agrees to cooperate and, at the Party B's expense,
assist in the filing of all patent applications in the Asia Pacific
Region, assign existing patents and patent applications in the Asia
Pacific Region, and take such other action for the protection of its
rights in any jurisdiction within the Asia Pacific Region as reasonably
requested by Party B; and, upon the completion of such registration,
such rights shall be deemed to be Patented Technology hereunder. Any
modifications or updates to the Patented Technology developed by Party B
shall be owned solely by Party B. Party B agrees to negotiate in good
faith a license agreement with Party A for any such modifications and
updates.
16.2 Except as set forth in clause 16.1, the ownership of the Patented
Technology and its modifications and updates shall remain with Party A.
16.3 If the Patented Technology contains any intellectual property belonging
to third parties, Party A will notify Party B in writing of such third
parties rights.
16.4 Party B will promptly notify Party A of any infringement of Party A's
rights in or to the Patented Technology, Product and the Licensed Marks
as soon as Party B is aware of such infringement. Party B agrees
promptly to take such commercially reasonable steps and actions to
protect and enforce Party A's right in or to the Patented Technology,
Product and the Licensed Marks on the condition that Party A agrees to
pay and indemnify Party B against all costs and liabilities that may be
incurred by Party B.
45
17. CONFIDENTIALITY
17.1 "Confidential Information" means the confidential information of a party
which relates to the subject matter of this Agreement and includes
information relating to:
(a) the design, specification and content of the Patented
Technology, the Product and the Services;
(b) the personnel, policies or business strategies of Party A and
Party B; and
(c) the terms on which the Patented Technology and Product are being
supplied and installed under this Agreement;
all of which information is deemed proprietary.
17.2 A party must not, without the prior written approval of the other party,
disclose the other party's Confidential Information.
17.3 It is not a breach of section 17 for a party to disclose Confidential
Information which it is obliged by law to disclose to the person to whom
it is disclosed or to the general public, if necessary or disclosure of
Confidential Information in the ordinary course of a party's business
provided such Confidential Information is not proprietary.
17.4 Each party must take all reasonable steps to ensure that its employees
and agents, and any sub-contractors engaged for the purposes of this
Agreement, do not make public or disclose the other party's Confidential
Information.
17.5 Each party may at any time require the other party's employees, agents
or sub-contractors engaged in the performance of this Agreement to
execute a suitable confidentiality deed.
17.6 Each party must on demand return to each other any documents supplied by
each other in connection with this Agreement.
17.7 Despite any other provision of this clause 17, each party may disclose
the terms of this Agreement (other than Confidential Information of a
technical nature) to its Related Company, solicitors, auditors, insurers
or accountants, but must ensure that every person to whom that
disclosure is made uses that information solely for the purposes of
advising or reporting to such party.
17.8 This clause 17 survives the termination of this Agreement.
18. MUTUAL EXCLUSIVITY
Each party agrees that they will not during the term of this Agreement,
engage or approach other third parties with a purpose of licensing,
distributing or providing the
46
same or similar type of Patented Technology, in connection with the
Product and Services, other than under the provisions of this Agreement.
19. DEFAULT
19.1 Each of the following is an event of default ("Event of Default"):
(a) pursuant to the final decision of an arbitrator in accordance
with clause 24 (if the Defaulting Party objects to the Notice of
Default);
(b) any party fails to carry out any material provision of this
Agreement and the failure is not capable of remedy or the
failure is capable of remedy and such party does not remedy that
failure within 30 days after written notice to the such party
requiring it to be remedied; notwithstanding the foregoing,
material breaches of clauses, other than clauses 2, 5, 10, 14
and 17 by Party B, and other than clauses 2, 3, 4, 8, 9,
12.1(f), 12.1(g), 14, 16 and 17 by Party A, shall not be Events
of Default;
(c) it becomes unlawful for any party to perform its material
obligations under clauses 2, 5, 9, 10 or 14 of this Agreement.
19.2 After an Event of Default occurs in relation to any party, the other
party may, without prejudice to its other rights and remedies, terminate
this Agreement by giving notice in writing to the defaulting party;
provided, however, that if the Defaulting Party objects to such notice
within 14 days, this agreement may be terminated only upon the final
decision of an arbitrator in accordance with clause 24.
19.3 On termination of this Agreement under this clause 19.2 each party
retains the rights it had against the other party in respect of any past
breach, in addition to any other rights, powers or remedies provided by
law.
19.4 In case an Event of Default occurs in relation to any party (the
"Defaulting Party"), the Defaulting Party must on demand pay to the
other party all of the expenses incurred by such other party in
connection with the breach or default including the giving of a notice
under clause 19.2 and otherwise in connection with the termination of
this Agreement.
20. TERMINATION
20.1 Notwithstanding the foregoing, Party A shall have the right to terminate
this Agreement on thirty (30) days prior written notice if (i) the
dollar amounts received by Party A under Section 5 hereof in any year,
beginning in Party B's second accounting year, are less than US$50,000
or (ii) if for any six month period beginning on that date which is six
months after the date hereof Party B is either not actively
manufacturing or marketing or distributing Products. Notwithstanding the
foregoing, in the event that the dollar amounts received by Party A
under Section 5 hereof (i) in the aggregate during the first five years
of this Agreement are less than US$500,000 or (ii) in any year,
beginning in year six
47
hereunder, are less than US$100,000, then the licenses granted hereunder
shall become in all respects non-exclusive.
20.2 If, at any time during the term of this Agreement, Party A: (a) files a
voluntary petition in bankruptcy under Chapter 7 or 11 of the United
States Bankruptcy Code (the "Bankruptcy Code"); or (b) has an
involuntary petition in bankruptcy filed against it under Chapter 7 of
the Bankruptcy Code, which petition is not dismissed within ninety (90)
days (each a "Party A Bankruptcy"), Party B may elect to retain its
right in the licenses granted in this Agreement, subject to the terms of
this Agreement, in accordance with Chapter 3, Section 365(n) of the
Bankruptcy Code. The licenses granted in this Agreement will be deemed
licenses of "intellectual property" under Section 365(n) of the
Bankruptcy Code. In addition, in the event of a Party A Bankruptcy, the
parties agree that such proceeding shall not affect the terms or
validity of this Agreement.
20.3 Upon termination of this Agreement for any reason other than pursuant to
clause 19.1(b) by reason of a material breach by Party A or by reason of
Party A Bankruptcy, Party B shall automatically and without the parties
having to take any action, assign, transfer and set over to Party A all
right, title and interest to the Asian Patents. Party B shall agree to
execute any and all instruments and documents reasonably requested by
Party A to evidence such assignment. Party B will not, without Party A's
prior written consent, transfer any interest in the Asian Patents other
than the sublicenses contemplated hereunder
21. LEGAL COSTS
Each party shall bear and pay its own legal costs relating to the
Licence and Distribution Agreement which inure after the date hereof.
22. SEVERABILITY
If any provision of this Agreement is held illegal, invalid or
unenforceable by a court of competent jurisdiction or the parties
otherwise mutually agree that a provision is or becomes illegal or
invalid, that provision will be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
23. LAWS
This Agreement shall be governed and interpreted in accordance with the
laws of Hong Kong Special Administrative Region ("Hong Kong") of the
People's Republic of China without regard to conflicts of law provisions
thereof and without regard to the United Nations Convention on Contracts
for the International Sale of Goods.
24. ARBITRATION
48
The parties agree to submit all disputes arising out of the Licence and
Distribution Agreement to arbitration in Hong Kong in accordance with
the Model Law on International Commercial Arbitration adopted by the
United Nations Commission on International Trade Law.
25. NOTICES
Any notice required or permitted to be given hereunder shall be in
writing and shall be (a) personally delivered, (b) transmitted by
internationally recognized air courier service, or (c) transmitted by
facsimile, in each case to the parties as follows, as elected by the
party giving such notice, to the other parties at the addresses set
forth on the first page of this Agreement or as amended by notice
pursuant to this subsection. Except as otherwise specified herein, all
notices and other communications shall be deemed to have been duly given
on (i) the date of receipt if delivered personally, (ii) three (3)
Business Days after delivery to the courier, or (iii) the next Business
Day in the jurisdiction of the recipient following the date of
transmission with electronic confirmation if transmitted by facsimile,
whichever shall first occur. Any party may change its address for
purposes hereof by notice to the other parties. All notices and other
communications shall be in the English language.
26. ENTIRE AGREEMENT
This Agreement, and all Attachments, schedules and exhibits hereto,
supersedes all proposals, oral or written, all negotiations,
conversations, or discussions between or among the parties relating to
the subject matter of this Agreement and all past dealing or industry
custom.
27. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF the parties have duly executed this Agreement the day
and year first above written.
PHARMAPRINT INC.
By:
-----------------------------------
Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
KINGSWAY PHARMAPRINT
ASIA LIMITED
49
By:
-----------------------------------
Its:
50
SCHEDULE 1.1
PATENTED TECHNOLOGY
AUSTRALIA
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Pharmaceutical Grade Botanical Drugs 04/15/97 28131/97 Issued
Pharmaceutical Grade Echinacea 10/23/98 13634/99 Pending
Pharmaceutical Grade Ginkgo Biloba 10/23/98 13633/99 Pending
Pharmaceutical Grade Ginseng 10/23/98 11183/99 Pending
Pharmaceutical Grade Saw Palmetto, 10/23/98 13635/99 Pending
Serenoa Repens
Pharmaceutical Grade St. John's Wort 10/23/98 13631/99 Pending
Pharmaceutical Grade Valerian, Black 10/23/98 13632/99 Pending
Cohosh, Vitex Agnus-Castus, Bilberry and
Milk Thistle
CANADA
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Pharmaceutical Grade Botanical Drugs 04/15/97 2252426 Pending
Pharmaceutical Grade Echinacea 10/23/98 2307614 Pending
Pharmaceutical Grade Garlic 10/23/98 2306812 Pending
Pharmaceutical Grade Ginkgo Biloba 10/23/98 2307194 Pending
Pharmaceutical Grade Ginseng 10/23/98 2307047 Pending
Pharmaceutical Grade Saw Palmetto, 10/23/98 2307602 Pending
Serenoa Repens
Pharmaceutical Grade St. John's Wort 10/23/98 2306818 Pending
Pharmaceutical Grade Valerian, Black 10/23/98 2307399 Pending
Cohosh, Vitex Agnus-Castus, Bilberry and
Milk Thistle
CHINA
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Pharmaceutical Grade Botanical Drugs 04/15/97 97195565.4 Published
Pharmaceutical Grade Ginkgo Biloba 10/23/98 PCT/US98/22506 Pending
Pharmaceutical Grade Ginseng 10/23/98 N/A Pending
EUROPEAN PATENT CONVENT
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
51
DATE
----
Mistletoe Extract and Method 04/13/96 96912546.7 Pending
Pharmaceutical Grade Botanical Drugs 04/15/97 97922474.8 Pending
Pharmaceutical Grade Echinacea 10/23/98 98957358.9 Published
Pharmaceutical Grade Ginkgo Biloba 10/23/98 98957357.1 Published
Pharmaceutical Grade Saw Palmetto, 10/23/98 N/A Pending
Serenoa Repens
Pharmaceutical Grade St. John's Wort 10/23/98 98957355.5 Pending
HONG KONG
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Pharmaceutical Grade Botanical Drugs 04/15/97 N/A Pending
JAPAN
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Mistletoe Extract and Method 04/3/96 08-531053 Pending
Pharmaceutical Grade Botanical Drugs 04/15/97 09-537454 Pending
Pharmaceutical Grade Ginkgo Biloba 10/23/98 2000-516688 Pending
Pharmaceutical Grade Ginseng 10/23/98 2000-516689 Pending
MEXICO
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Pharmaceutical Grade Botanical Drugs 04/15/97 000000 Xxxxxxx
XXXXXX XXXXXX
TITLE FILING DATE SERIAL NO. STATUS
----- ----------- ---------- ------
Pharmaceutical Preparations Derived from 04/14/95 5,547,674 Issued
European Mistletoe
Pharmaceutical Preparations Derived from 04/14/95 5,565,200 Issued
Korean Mistletoe
Mistletoe Extract and Method 07/14/98 5,780,037 Issued
Pharmaceutical Grade Botanical Drugs 04/15/97 08/838,198 Pending
Pharmaceutical Grade Botanical Drugs 06/2/99 08/632,273 Pending
52
Pharmaceutical Grade Valerian, Black 12/2/99 09/331,831 Pending
Cohosh, Vitex Agnus-Castus, Bilberry and
Milk Thistle
Pharmaceutical Grade Echinacea 06/23/99 09/331,797 Pending
Pharmaceutical Grade Garlic 06/23/99 09/331,824 Pending
Pharmaceutical Grade Ginkgo Biloba 06/23/99 09/331,827 Pending
Pharmaceutical Grade Saw Palmetto 10/23/97 6,039,950 Issued
Pharmaceutical Grade Saw Palmetto 08/20/99 09/378,774 Pending
Pharmaceutical Grade Saw Palmetto 06/23/99 09/331,832 Pending
Pharmaceutical Grade St. John's Wort 10/23/97 08/956,602 Allowed
Pharmaceutical Grade St. John's Wort 09/23/98 09/159,313 Pending
Standardized Functional Food Products 09/20/99 60/154,842 Pending
Pharmaceutical Grade Ginseng 10/22/98 09/177,702 Pending
53
SCHEDULE 10.2
LICENSED XXXX
United States:
1. PharmaPrint: published for opposition.
2. Three Leaf Logo: pending; office action was issued and has been
addressed.
3. PharmaPrint Certified: pending; office action was issued and has been
addressed.
Canada:
1. Notice of allowance given for PharmaPrint. Need to demonstrate that this
xxxx has been commercially used in Canada to complete the registration.
2. Notice of allowance given for Three Leaf Logo. Need to demonstrate that
this xxxx has been commercially used in Canada to complete the
registration.
Japan:
1. Three Leaf Logo: is registered.
2. PharmaPrint: is registered.
54
SCHEDULE 12
DISCLOSED MATTERS
Clause 12 (e): Consents to Transaction.
None.
Clause 12(f): Claims and Infringements.
None.
Clause 12(g): Claims and Proceedings.
None.
