Management Entrustment Agreement
This
Agreement is made and entered into on 25th September, 2008 in Xi’an City,
Shaanxi Province, the People’s Republic of China (“PRC”), by and between the
following parties:
Party
A:
Xi’an Qinba Xintong Medical Ltd.,
Registered
business address: 906F/A, Zhengxin Bldg, No.5 Gaoxin Road, Xi’an
China
Party
B:
Xi’an Huifeng Bio-Technic Inc.
Registered
business address: 16F/B, Ruixin Bldg, No.25 Gaoxin Road, Xi’an,
China
WHEREAS:
1.
Party
A is a enterprise registered in Xi’an, and legally existing to date. The number
of its business license is 6101001401713.
2.
Party
B is a Wholly Foreign-Owned Enterprise registered in Xi’an, and legally existing
to date. The number of its business license is 002469 Shaanxi.
3.
In
order to let Party B have actual control of Party A and realize the
consolidation of financial statements, Party A intends to irrevocably entrust
to
Party B for its management the right of operation management of Party A and
the
responsibilities and authorities of its shareholders and the executive director
of Party A.
4.
Party
B agrees to accept the entrustment of Party A, and to exercise the right of
operation management of Party A and the responsibilities and authorities of
its
shareholders and the executive director of Party A.
5.
Party
A has obtained the approval of its shareholders and directors to enter into
this
Agreement. The shareholders also have issued the commitment letter of competing
industry prohibition.
NOW,
THEREFORE, through friendly consultation, under the principle of equality and
mutual benefits, in accordance with the relevant laws and regulations of PRC,
the parties agree to enter into this Agreement and to be bound with the terms
and conditions as follows:
Article
1
Entrusted Operation
|
1.1
|
Party
A agrees to irrevocably entrust the right of operation management
of Party
A and the responsibilities and authorities of Party A’s shareholders and
the executive director to Party B in accordance with the terms and
conditions of this Agreement. Party B agrees to exercise the aforesaid
rights and responsibilities in accordance with the terms and conditions
of
this Agreement.
|
|
1.2
|
The
term of the entrusted operation is from the effective date of this
Agreement to 31st
December, 2009.
|
|
1.3
|
The
purpose of the entrusted operation is: Party B shall be in charge
of the
normal business operations of Party A and perform the responsibilities
and
rights of Party A’s investor and the executive director, and Party A shall
pay all of its profit (if any) to Party B. During the term of the
entrusted operation, Party B, as the entrusted manager, shall provide
full
management to Party A’s operations.
|
|
1.4
|
The
contents of the entrusted operation shall include but not be limited
to
the following:
|
|
1)
|
Party
B shall be in charge of all aspects of Party A’s operations; nominate and
replace the members of Party A’s executive director, engage Party A’s
management staff and decide their
compensation.
|
|
2)
|
Party
B shall manage and control all the funds of Party A. The accounts
of Party
A shall be managed solely by Party B. The seals and signatures for
such
account shall be the seals and signatures of the personnel appointed
and
confirmed by Party B. All the cash of Party A shall be kept in this
entrusted account shall be handled through this account, including
but not
limited to receipt of all Party A’s business income, current working
capital, recovered account receivables, and the payment of all account
payables and operation expenses, employee salaries and asset purchases,
etc.
|
|
3)
|
All
the matters of Party A, including but not limited to internal financial
management, day-to-day operation, external contact execution and
performance, tax filing and payment, change of rights and personnel,
shall
be controlled and managed by Party B in all
aspects.
|
|
4)
|
Party
B shall enjoy all the other responsibilities and rights enjoyed by
Party
A’s investor in accordance with the applicable law and the articles
of
association of Party A, including but not limited to the
following:
|
| a. |
Deciding
Party A’s operation principles and investment
plan;
|
| b. |
Nominating
the executive director or the
supervisor;
|
| c. |
Discussing
and approving the report of the executive director or the
supervisor;
|
| d. |
Discussing
and approving the annual financial budget and settlement
plan;
|
| e. |
Discussing
and approving the profit distribution plan and the loss compensation
plan;
|
| f. |
Resolving
on the increase or decrease of the registered
capital;
|
| g. |
Resolving
on the issuance of the corporate
bond;
|
| h. |
Resolving
on the matters including merger, division, change of corporate form,
dissolution and liquidation of the
company;
|
| i. |
Amending
the articles of association;
|
| j. |
Other
responsibilities and rights provided by Party A’s articles of association.
|
|
5)
|
Party
B enjoys all the other responsibilities and rights enjoyed by Party
A’s
executive director in accordance with the applicable law and the
articles
of association of Party A, including but not limited to the
following:
|
| a. |
Executing
the resolution of the investor];
|
| b. |
Deciding
the company’s operation plan and investment
scheme;
|
| c. |
Composing
the annual financial budget and settlement
plan;
|
| d. |
Formulating
the profit distribution plan and the loss compensation
plan;
|
| e. |
Formulating
the plans regarding to the increase or decrease of the registered
capital
and the issuance of the corporate
bond;
|
| f. |
Formulating
the plans regarding to the matters including merger, division, change
of
corporate form and dissolution of the
company;
|
| g. |
Deciding
on the establishment of the internal management structure of the
company;
|
| h. |
Formulating
the basic rules and regulations of the
company;
|
| i. |
Representing
the company to sign relative
documents;
|
| j. |
Other
responsibilities and rights provided by Party A’s articles of
association.
|
|
6)
|
The
said entrustment is irrevocable and shall not be withdrawn, unless
the
Agreement is terminated pursuant to written agreement of both
parties.
|
|
1.5
|
The
Fee of Entrusted Operation: For the performance of the entrusted
matters
provided under this Agreement, Party A shall pay an entrustment fee
to
Party B, which shall be 70% of Party A’s total profit (if any) after
deduction of necessary expenses. Party A shall transfer the payment,
which
is obtained by selling its equipment, inventories, raw materials,
components, accounts receivable and by renting its real estate, land
use
right, to Party B as the entrustment fee. If the net amount is zero
or
negative after the aforesaid calculation, Party A shall not pay any
entrustment fee, and the 70% of the loss of the given month shall
be
deducted in the following months’ entrustment fee. Party A and Party B
shall calculate and settle each month’s entrustment fee payable by Party A
within 10 days after the end of that
month.
|
Article
2
Rights and Obligations of the Parties
2.1 During
the term of the entrusted operation, the rights and obligations of Party A
shall
include:
|
1)
|
After
the execution of this Agreement, the management of Party A shall
be handed
over to Party B. Party A’s executive director shall, within 5 days after
the effective date of this Agreement, deliver Party A’s seals and
financial materials (including but not limited to balance sheet,
profit
and loss statement, cash flow statement and any attachments, relevant
right certificates and other proprietary and operation documents)
to Party
B to ensure that Party B could exercise its operation management
rights in
all aspects after taking over the management of Party A and could
set up
financial records accordingly;
|
|
2)
|
During
the term of the entrusted operation, without Party B’s consent, Party A
and its investor and executive director shall not make any decision
on
Party A’s operations, and they shall not intervene with Party B’s
entrusted management activities in any
form;
|
|
3)
|
During
the term of the entrusted operation, Party A’s executive director shall
have the obligation to cooperate with Party B in accordance with
Party B’s
request to ensure the stability and consistency of the
operation;
|
|
4)
|
To
entrust the authorities of the investor and the executive director
to
Party B;
|
|
5)
|
To
timely pay the entrustment fee to Party
B;
|
|
6)
|
Without
Party B’s consent, Party A shall not entrust any third party other than
Party B in any form to manage Party A’s
businesses;
|
|
7)
|
The
executive director and investor of Party A shall issue necessary
documents
for the purpose of accomplishing the management by Party
B;
|
|
8)
|
Party
A shall not unilaterally early terminate this Agreement for any
reason.
|
|
9)
|
Any
other rights and obligations of Party A necessary for Party B to
perform
the management duties provided under this
Agreement.
|
2.2 During
the term of the entrusted operation, the rights and obligations of Party B
shall
include:
|
1)
|
Party
B shall enjoy independent and comprehensive management right over
Party
A’s operations;
|
|
2)
|
Party
B shall have the right to adjust the organizational structure and
the
personnel placement of Party A based on the needs of the
management;
|
|
3)
|
Party
B shall have the right to dispose of all the assets on the books
of Party
A on the execution day of this Agreement, and Party can B dispose
of any
of the aforesaid assets without any prior consent of Party
A;
|
|
4)
|
Party
B shall be entitled to 70% of the Party A’s profit after deducting
necessary expenses.
|
|
5)
|
Party
B shall has the right to invest in the projects of new products and
technologies of Party A, also enjoys the profits from these projects
in
the future.
|
|
6)
|
Party
B shall take over of Party A in a timely
manner;
|
|
7)
|
Party
B shall carry out all the responsibilities and rights entrusted to
it
under this Agreement in good faith and with honesty and trustworthiness,
and shall pay reasonable attention to the entrusted matters and notify
Party A timely of relevant matters;
|
|
8)
|
Party
B shall act in good faith and consult with Party A in regards to
the
handling of matters not covered by this
Agreement;
|
|
9)
|
Other
obligations shall be performed by Party B under this Agreement.
|
Article
3
Warranties and Representations
Each
party shall warrant and represent to the other party, on the execution day
of
this Agreement, that:
| 1) |
Each
party shall have the right to enter into this Agreement, and the
ability
to perform this Agreement;
|
| 2) |
In
order to execute and perform this Agreement, each party has gone
through
the necessary internal decision-making procedures and obtained the
necessary approvals;
|
| 3) |
Each
party has duly authorized its representative to execute this
Agreement;
|
| 4) |
Each
party shall not have any reason of its own that will encumber the
effectiveness of this Agreement from the effective date and become
binding
on such party;
|
| 5) |
The
execution of this Agreement and the performance of the obligations
hereunder will NOT:
|
| a) |
violate
the business license, articles of association or any other similar
documents of that party;
|
| b) |
violate
the laws and regulations of PRC or the government authorization or
permit;
|
| c) |
violate
any other contracts or agreements to which that party is a party
(or is
bound), or lead to that party’s breach of contract under such contracts or
agreements.
|
Article
4
Effect of the Agreement
This
Agreement shall be valid upon the subscription of both parties’ legal
representatives or duly authorized representatives and the affixture of both
parties’ corporate seals.
Article
5
Liability of Breach of the Agreement
|
(1)
|
After
the effectiveness of this Agreement, apart from the situation described
in
Article 6 of this Agreement, either party’s violation of any provisions
under this Agreement shall constitute a breach of this Agreement
and thus
be liable to compensate the non-breaching party for any damages that
may
arise thereof.
|
|
(2)
|
After
the entrusted audit institution of Party B audited Qinba’s 2007 financial
status, if the data of the sales and profit of Qinba provided by
Party A
is different from the result of Party B’s auditing, and the difference is
more than 1%, then Party A will be in violation of this Agreement,
and
Party B has the right to unilateral terminate this Agreement. Party
A will
pay RMB 100,000 as compensation to Party
B.
|
Article
6
Force Majeure
Either
party’s failure to perform the obligations or part of the obligations of this
Agreement due to a force majeure event shall not be deemed as a breach of the
agreement; however, the non-performing party shall timely provide effective
evidence of the force majeure event to the other party, and the parties shall
discuss a settlement plan through consultation.
Article
7
The Governing Law
The
execution, effectiveness, interpretation, performance and dispute resolution
of
this Agreement shall be governed by the laws and regulations of
PRC.
Article
8
Dispute Resolution
Any
dispute arising under this Agreement shall be first settled by the parties
through friendly consultation. If the dispute cannot be settled through
consultation, either party is entitled to submit the dispute to the People’s
Court that has jurisdiction over the dispute.
Article
9
Confidentiality
|
9.1
|
The
parties agree and shall cause their relevant personnel to keep strict
confidence of all the terms and conditions of this Agreement and
all the
matters such personnel shall have access to through the entrusted
operation. They shall not disclose the aforesaid information to any
third
party unless it is required by the explicit provision of law, or
the
instruction of judicial or governmental agencies or with consent
of the
other party, otherwise, the disclosing party shall bear the relevant
legal
consequences.
|
|
9.2
|
The
confidentiality obligation of the parties shall survive the termination
of
this Agreement.
|
Article
10 Severability of the Clauses
| 10.1 |
If
any clause of this Agreement is invalidated or non-enforceable due
to the
provisions of applicable laws or regulations, such clause shall be
deemed
invalid while all other clauses shall remain in full force and effect
and
binding upon both parties.
|
| 10.2 |
In
the event the aforesaid situation occurs, the parties shall, through
friendly consultation, agree upon a supplemental agreement to replace
the
invalid clause at their earliest possible
time.
|
Article
11 Non-waiver of Rights
| 11.1 |
If
one party fails or delays to exercise a certain right provided under
this
Agreement, such failure or delay shall not constitute the waiver
of such
right by that party.
|
| 11.2 |
If
one party fails to require the other party to perform a certain obligation
provided under this Agreement, such failure shall not constitute
the
waiver by that party of the right to require the other party to perform
at
a later time.
|
| 11.3 |
If
one party violates any clause of this Agreement and obtains a waiver
of
liability from the non-violating party, such waiver shall not constitute
the waiver of liability by the non-violation party over the violations
by
the other party at a later time or of other clauses of this
Agreement.
|
Article
12 No Transfer
Unless
otherwise provided in this Agreement, without the prior written consent of
the
other party, one party shall not transfer or entrust this Agreement or any
right
or obligation under this Agreement to a third party.
Article
13 Miscellaneous
| 13.1 |
Any
supplemental agreements entered into in writing by the parties herein
after the effective date of this Agreement shall be an effective
part of
this Agreement and have the same legal effect as this Agreement.
If there
is any discrepancy between the supplemental agreement and this Agreement,
the supplemental agreement shall
prevail.
|
| 13.2 |
This
Agreement is written in Chinese and English. This Agreement is executed
in
six official copies of each language, each party shall have two official
copies of each language and the remaining shall be retained for the
government procedure purposes. In the event of any conflict between
the
two versions, the Chinese version shall
prevail.
|
| 13.3 |
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on
this date first above written.
|
|
(NO
CONTEXT BELOW)
|
|
|
(SIGNATURE
PAGE)
|
|
|
Party
A: Xi’an Qinba Xintong Medical Ltd.,
|
|
|
Legal
representative:
|
|
|
/s/
Pu Jun
|
|
|
Party
B: Xi’an Huifeng Bio-Technic Inc.
|
|
|
Legal
representative:
|
|
|
/s/
Jing’xx Xxxx
|
