**Exhibit 10.11**

 

**CONTRACT TO ESTABLISH AN EQUITYJOINT VENTURE ENTERPRISE**

 

# **Chapter  1:  General Provisions**

 

In accordance with the “Law of the People’s Republic of China onSino-foreign Equity Joint Venture Enterprises” (hereinafter, the “EJV Law”),the implementing regulations thereto, and other relevant laws and regulations,Ningbo Longxing Group Corporation Limited, a limited liability companyincorporated pursuant to the laws of the People’s Republic of China(hereinafter, “China” or “the PRC”), and Thermadyne Holdings Corporation, alimited liability company incorporated pursuant to the laws of the State ofDelaware of the United States of America, having engaged in friendlyconsultations conducted in accordance with the principle of equality and mutualbenefit, now agree to jointly invest in, and to establish in accordance withthe EJV Law and other relevant Chinese laws and regulations, an equity jointventure enterprise in Ningbo, China.

 

# **Chapter  2:  Parties to the Joint Venture Contract**

 

Article 1       The parties to thisjoint venture contract are as follows:

 

1.       Ningbo Longxing GroupCorporation Limited (hereinafter referred to as “Party A”), a legal entityincorporated in China and having its registered legal address at LuguangBridge, Hengxi Town, Yinzhou District, Ningbo, Zhejiang Province, China and

 

2.       Thermadyne HoldingsCorporation (hereinafter referred to as “Party B”), a legal entity incorporatedin the United States and having its registered legal address at 16052 SwingleyRidge, Suite 300, St. Louis, MO  63017,United States of America.

 

# **Chapter  3:            Establishment of the Joint VentureEnterprise**

 

Article 2       In accordance withthe EJV Law, the implementing regulations thereto,  and other relevant laws and regulations, eachof Party A and Party B agrees to establish an equity joint venture enterprise(hereinafter referred to as the “EJV”) that shall have independent legal personstatus and limited liability.

 

Article 3       The name of the EJVshall be宁波富利达气割设备有限公司in Chinese and Ningbo Fulida Gas Equipment Co., Ltd. in English.  The legal address of the EJV shall be RenminRoad (to be finalized), Hengxi Town, Yinzhou District, Ningbo, ZhejiangProvince, China.

 

Article 4       All activities ofthe EJV shall comply with, and be governed by, the published and freelyavailable laws, regulations, decrees and pertinent judicial interpretations ofChina and of the relevant courts of China.

 

1

----

 

Article 5         The organizationalform of the EJV shall be that of a limited liability EJV.  Each of Party A and Party B, unless theyotherwise expressly assume an additional liability, shall be liable for theliabilities and losses of the EJV only to the limit of their respectivesubscription to the registered capital of the EJV.  The after-tax profits of the EJV shall bedistributed between Party A and Party B in the following ratio:  to Party A, fifty percent; and to Party B,fifty percent.

 

# **Chapter 4              Purpose,Business Scope and Scale of Production**

# ** **

Article 6         The purpose ofthe EJV will be to provide services to customers in China and around the world,through manufacture and sale of high-quality gas equipment and products(hereinafter, “the Products”), EJV’s use of the international brands of Party Band registration of its own trademarks.

 

Article 7         The businessscope of the EJV will be to manufacture and sell high-quality gas equipment andproducts Without limiting the generality of the foregoing, the purpose of theEJV shall also include engaging in such other business activities as, in thediscretion of the Board of Directors, are necessary or desirable in order topromote the successful marketing and sale of the Products, such as providingafter-sales service.

 

Article 8         Recognizing thatmarket conditions may change within China and in the international markets theEJV will initially target, each of Party A and Party B intends to cooperate sothat the EJV can achieve an estimated initial annual scale of production ofapproximately 2,000,000 units of the Products. The Parties recognize that production will fluctuate over time and inresponse to changing market conditions.

 

# **Chapter 5              TotalAmount of Investment and Registered Capital**

# ** **

Article 9         The total amountof investment of the EJV shall be US$5,000,000.

 

Article l0        The registeredcapital of the EJV shall be US$3,000,000, of which Party A shall contributefifty (50) percent and Party B shall contribute fifty (50) percent. Fifteenpercent (15%) of the registered capital will be contributed within three monthsfollowing the issuance of business license, and the remaining contributionshall be completed within two years after the issuance of business license.

 

Article 11       The contributionto registered capital to be made by Party A shall be in the form of cash equalto fifty (50) percent of the total registered capital amount.  The contribution to registered capital to bemade by Party B shall be in the form of cash equal to fifty (50) percent of thetotal registered capital amount.

 

Article 12       The EJV mayborrow up to US$2,000,000 additional funds required to carry on the businessactivities stipulated at Article 7 of this Contract and may mortgage 

 

2

----

 

its assets in relation to such borrowing. Neither of Party A nor PartyB shall be obligated to lend additional funds to the EJV or to guarantee loansmade to the EJV by third parties or financial institutions.  Notwithstanding the foregoing, however, anyParty making a loan or giving a guarantee in connection with debt assumed bythe EJV, as aforesaid, shall be entitled to be paid interest and / or relatedtransaction fees as if it were not a Party to this Contract and as if thetransaction were a negotiated arm’s-length financing concluded with a thirdparty.

 

Article 13       The registeredcapital of the EJV may be increased or decreased only with the unanimouswritten approval of the Board of Directors of the EJV and the approval of theOriginal Examination and Approval Authority.

 

If the Board of Directors of the EJV decides to change the registeredcapital of the EJV, each of Party A and Party B shall have the option - inorder to maintain its original percentage ownership share in the registeredcapital of the EJV as changed - of changing its contribution to the registeredcapital in proportion to its original equity share.

 

Article 14       Where either ofParty A and Party B wishes to assign ownership of all or part of its registeredcapital contribution to a third party, written consent must be obtained fromthe non-assigning Party and, promptly thereafter, written approval shall besought and obtained from the Original Examination and Approval Authority.

 

Article 15       Where a Party(the “Transferring Party”) wishes to assign, sell or otherwise dispose of allor part of its registered capital contribution to the EJV to a third party (the“Transfer”), it shall give written notice (the “Transfer Notice”) to the otherParty of: (i) its wish to make the Transfer; (ii) the interest it wishes totransfer; (iii) the terms and conditions of the Transfer; and (iv) the identityof the proposed transferee.  The otherParty shall have a pre-emptive right to purchase the whole of such interest onthe same terms and conditions as are specified in the Transfer Notice.

 

Article 16       Within thirty(30) days of actual delivery to it of the Transfer Notice, the other Partyshall give the Transferring Party written notice of whether it will purchasethe whole of the interest to be transferred. If the other Party fails to give written notice to the TransferringParty within such thirty (30) day period that it will purchase such interest,it shall be deemed to have agreed to the Transfer specified in the TransferNotice, and the Transferring Party may assign, sell or otherwise dispose ofsuch interest to the proposed transferee on the terms and conditions set out inthe Transfer Notice.  The Parties shallcause the directors of the EJV to unanimously agree to such assignment, sale orother disposition.  The Transferring Partyshall provide the other Party with a duplicate of the executed writtenagreement concluded with the transferee within fourteen (14) days of executionof such agreement.

 

3

----

 

# **Chapter 6              Responsibilitiesof Each Party to the EJV**

 

Article 17       Party A, inaddition to its other responsibilities under this Contract, shall beresponsible for:

 

(1) assisting the EJV to handle matters incidental to (i) submittingapplications to, and obtaining the approval of this Contract from, the OriginalExamination and Approval Authority in Ningbo and / or any other Chinesegovernment Original Examination and Approval Authority whose approval isrequired; (ii) completing registration formalities with the Administration forIndustry and Commerce in Ningbo and obtaining a valid business license for theEJV; (iii) registering the EJV with relevant tax authorities and other relevantregistrations authorities; and (iv) timely contributing the cash amount to theregistered capital of the EJV as is indicated in Article 12 hereof;

 

(2) assisting the EJV, in cooperation with the relevant governmentdepartments in Ningbo, to handle registration procedures for the EJV’s land-userights to the site or sites on which it carries on its business activities; andin handling all other necessary procedures to ensure that the EJV has the rightto use such site or sites for operations throughout the full term (includingany extensions) of its operation; and in making certain that the EJV is issuedand receives, from the relevant government department(s) in Ningbo, a validland-use rights certificate(s) for the site or sites on which it carries on itsbusiness activities;

 

(3) if requested in writing to do so, assisting the EJV in obtainingapproval from the Original Examination and Approval Authority in Ningboconfirming that all equipment and components, and other machines and materialsto be imported by the EJV for manufacturing purposes are exempt from PRCCustoms duties and other import-related taxes; handling PRC Customs declarationprocedures (including obtaining all relevant import and export licenses, to behandled in accordance with existing tax and duty stipulations of PRC) forimported raw materials, machinery, equipment, materials, supplies, and relateddocumentation and exported products of the EJV; and arranging for the inlandtransportation of imports to the site or sites on which the EJV carries on itsbusiness activities; and in applying for other governmental approvals requiredfor operation of the EJV in China;

 

(4) assisting the EJV in obtaining all required approvals, permits andcertificates relating to the construction, renovation, ownership, managementand maintenance of the site or sites on which the EJV carries on its businessactivities;

 

(5) if requested in writing to do so, assisting the EJV in obtaining,sourcing, purchasing or leasing within China adequate supplies of fuels, rawmaterials, local equipment, articles for office use, means of transportation,communication facilities etc.;

 

(6) assisting the EJV in contracting for, and obtaining, thefundamental facilities, services and utilities required by the EJV, such as,but not limited to, water, electricity, heating, sewage and waste treatment,telecommunications, and transportation and such as conform to specificationsand conditions specified by the EJV in writing, on a continuous uninterruptedbasis, in quantities sufficient to meet the full operational requirements ofthe EJV and in line with the practice of other comparable joint ventures inNingbo, at a 

 

4

----

 

favorable cost in Renminbi not higher than that paid by state-ownedenterprises for similar facilities, services and utilities in the Ningbo area;

 

(7) assisting expatriate personnel of the EJV and of Party B inhandling the necessary procedures for entry visas, work permits and travelingarrangements, and assisting in arranging appropriate housing acceptable toParty B for expatriate employees of the EJV, and hotel accommodations for PartyB personnel visiting China on temporary assignment to the EJV;

 

(8) ensuring that management and technical personnel and workers hiredand trained by the EJV are not transferred to Party A (or to subordinatecompanies wholly or partially owned by Party A) or, especially, without theconsent of General Manager of the EJV, to competitors of Party B or the EJVoperating in China;

 

(9) assisting the EJV in obtaining Renminbi and foreign exchange loansfrom financial institutions within China;

 

(10) assisting the EJV to apply for and obtain all possible taxreductions and exemptions and all other relevant investment incentives,privileges and preferences available to the EJV under Chinese law, including,if appropriate, designation of the EJV as a technologically advanced enterpriseor a high-or-new technology enterprise;

 

(11) if requested in writing to do so, and thereafter on an on-goingbasis, assisting the EJV in applying for and being granted all necessaryapprovals, permits, certificates and licenses required in connection withsafety, environmental matters (especially waste disposal) and other mattersregulated by Chinese governmental authorities;

 

(12) generally assisting the EJV in establishing and maintaining goodrelations with the Ningbo local government authorities and Chinese companiesable to contribute to the success of the EJV; and

 

(13) handling such as other matters as are entrusted to it by the EJVfrom time to time.

 

Article 18       Party B, inaddition to its other responsibilities under this Contract, shall beresponsible for:

 

(1) assisting the EJV to purchase or lease all necessary items ofmachinery, equipment, supplies, office appliances, means of transportation,communication facilities and other materials required by the EJV from outsideChina and necessary for successful operation of the EJV;

 

(2) assisting the EJV, at the EJV’s expense, in arranging with themanufacturers of the imported machinery and equipment referenced in (1), above,for the provision of necessary technical personnel during the installation andtesting of such machinery and equipment during commissioning, if the Partiesdeem such assistance to be necessary;

 

5

----

 

(3) assisting the EJV in recruiting expatriate management and technicalpersonnel;

 

(4) assisting the EJV in formulating standards for recruiting,evaluating and promoting both locally hired and expatriate staff and workers;

 

(5) assisting the EJV in arranging foreign visas and suitableaccommodations for personnel and directors of the EJV who are required totravel outside China on legitimate business or other purposes of the EJV;

 

(6) timely contributing cash amount to the registered capital of theEJV as is indicated in Article 12 hereof; and

 

(7) handling such other matters as are entrusted to it by the EJV fromtime to time.

 

# **Chapter 7              Transferof Technology**

# ** **

Article 19       Each of Party Aand Party B agrees that a no-cost technology transfer agreement shall be signedbetween the EJV and Party B and that, pursuant to and in consequence of suchagreement, Party B shall disclose and license to the EJV certain confidentialand proprietary information and know-how necessary for the EJV to achieve theproduction and sale of Products as specified in Chapter 4 of this Contract.

 

Article 20       Party B offersthe following guarantees with respect to the technology it will transfer to theEJV pursuant to the technology transfer agreement:

 

(1) Party B guarantees that the technology will meet all operatingrequirements of the EJV and permit the EJV to manufacture Products at aconsistent standard of quality and production capacity so that the EJV is ableto achieve its purpose as set out in Article 6 hereof;

 

(2) Party B guarantees that the technology specified in this Contractand in the technology transfer agreement shall be fully transferred to the EJV,and pledges that the said technology shall be truly advanced among the sametype of technology produced by Party B and that the model, specifications, andquality of the equipment shall be excellent and able meet the requirements oftechnological operation and practicality;

 

(3) Party B shall work out a detailed list of the technology to betransferred and provide this to the EJV as soon as possible following executionof this Contract;

 

(4) Relevant drawings, technological conditions and other detailedinformation shall be included as part of the transferred technology and shallbe timely provided to the EJV; and

 

6

----

 

(5) During the term of the technology transfer agreement, and for noadditional fee, Party B shall provide to the EJV all improvements in thetechnology transferred to the EJV as provided in the technology transferagreement.

 

#### **Chapter 8              Right to Use the Site; Lease ofFacilities to EJV; Utilities**

 

Article 21       Party Arepresents and warrants that: (i) it has obtained granted land use rights tothe site on which are located the premises it will lease to the EJV at start-upof operations in China; (ii) the term of the granted land use rights is 50years and will be available to the EJV for the full length of its term,including any extensions thereof; (iii) official documents issued to Party A bythe Ningbo Land Bureau, or other relevant Ningbo governmental agency, will bepresented to Party B’s attorney for review prior to execution of this Contract;(iv) pursuant to the lease agreement it will conclude with the EJV, Party Awill provide preferential treatment to the EJV in respect to all mattersrelating to the leased premises; and (v) with assistance from Party A asrequired, the EJV will obtain a sufficient and uninterrupted supply of variouspublic utilities services required by the EJV on terms and conditions no lessfavorable than those obtained by other Chinese-owned and operated enterpriseslocated in the vicinity.

 

# **Chapter 9              TrademarkLicense Agreement**

# ** **

Article 22       Within thirty(30) days following execution of this Contract, Party B and the EJV will enterinto a no-charge trademark license agreement such that the EJV will beauthorized to use certain licensed trademarks belonging to Party B, includingthose indicated below in the course of marketing and offering for sale, both inChina and in international markets, the Products.

 

Article 23       The trademarks licensedby Party B to the EJV are:  Victor andCutskill.

 

# **Chapter 10            Saleof Products**

# ** **

Article 24       The Products willbe sold in China and in such international markets as shall be determined bythe Board of Directors of the EJV from time to time.

 

Article 25       The Productsshall be sold in international markets through the following channels:

 

(1) the EJV may directly sell the Products into a certain internationalmarket using marketing and sales channels known and introduced to it by PartyB;

 

(2) the EJV may, through supply contracts and at a price equal to theactual cost of manufacturing the Products plus a fifteen percent (15%) markup,sell Products to Party B and/or its subsidiary companies for export from Chinaby Party B and/or its subsidiary 

 

7

----

 

companies. The aforesaid actual costs of manufacturing are defined asmaterial costs, direct and indirect manufacturing labor costs and other costsdirectly related to the manufacture of the Products; or

 

(3) with the prior written approval of Party B, the EJV may signmarketing and sales contracts with Chinese or foreign trading companies,thereby entrusting such companies to function as a sales or exclusive salesagent within an area defined in each particular sales contract.

 

Article 26       The Products ofthe EJV that are to be sold within China may be marketed and sold by the EJVitself or, in the discretion of the Board of Directors of the EJV, may beentrusted to a Chinese marketing and sales agent appointed by them pursuant toa written contract.

 

Article 27       In order toprovide high-quality maintenance service to the Products sold in China ininternational markets, the EJV may (subject to the approval of the relevantChinese governmental authority) establish sales and service branch operationsof the EJV both in China and in such international markets.

 

**Chapter 11            TheBoard of Directors**

 

Article 28       The Board ofDirectors of the EJV shall be formed on the date on which the NingboAdministration for Industry and Commerce issues the valid business license ofthe EJV.

 

Article 29       The Board ofDirectors of the EJV, including the Chairman and vice-Chairman, shall consistof four (4) directors.  Each of Party Aand Party B shall appoint two (2) directors. The Chairman shall be appointed by Party B and the vice-Chairman shallbe appointed by Party A.  Each of theChairman, vice-Chairman and the other two directors shall be appointed for aterm of four (4) years. Four (4) years later, the Chairman shall be appointedby Party A and the vice-Chairman shall be appointed by Party B. Thereafter,such power of appointment shall be rotated every four years.

 

Article 30       A Party may, atany time, remove any director appointed by such Party by giving written noticeto the EJV and a copy of such notice to the other Party.  If a seat on the Board of Directors isvacated by retirement, removal, resignation, illness, disability or death of adirector, the Party that originally appointed such director may appoint asuccessor to serve out such director’s term.

 

Article 31       Notice of ameeting of the Board of Directors of the EJV shall be in writing and sentsimultaneously to each of Party A and Party B at their usual business addressusing any of the means for delivery of notices stipulated in Article 105hereof.

 

Article 32       To transact anybusiness or adopt any resolutions, a quorum of not less than three (3)directors must be present, either in person or by proxy, at a meeting of the 

 

8

----

 

Board of Directors of the EJV. Each director shall be entitled to cast one vote in response to eachproposed resolution and, in the event of an equal number of votes being cast,the deadlock shall be handled in accordance with the dispute settlementprovisions set out in Chapter 26 hereof.

 

Article 33       Assuming a quorumis present, decisions of the Board of Directors relating to the followingmatters shall be deemed to be properly made only upon the unanimous agreementof directors present at a Board of Directors meeting:

 

(1) unplanned expenditure of capital outside the ordinary course ofbusiness of the EJV;

(2) hiring and firing of high-ranking management personnel of the EJV;

(3) expenditures required for employees of the EJV involved ininternational business on behalf of the EJV;

(4) amendment of the Articles of Association of the EJV;

(5) termination and dissolution of the EJV;

(6) increase or assignment of the registered capital of the EJV;

(7) merger of the EJV with another economic organization;

(8) incurring short or long term debt; or

(9) sale of assets outside the normal course of business.

 

Decisions on other matters shall be deemed to be properly made if madein accordance with rules of procedure stipulated in the Articles of Associationof the EJV.

 

Article 34       The Chairman ofthe Board of Directors is the legal representative of the EJV.  Should the Chairman, for any reason, beunable to discharge his responsibilities as legal representative, he shallauthorize the vice-Chairman or any other director to act as the legalrepresentative of the EJV on a temporary basis.

 

Article 35       The Board ofDirectors of the EJV shall convene at least one (1) meeting each year.  The meeting shall be called and presided overby the Chairman of the Board of Directors. In addition, the Chairman may elect to convene an interim meeting, orinterim meetings, of the Board of Directors following a proposal made by atleast one-half of the total number of directors and provided that at least one(1) director from each of Party A and Party B participates in making suchproposal.

 

Article 36       Meetings of theBoard of Directors shall be conducted in English and Chinese and, to the extentnecessary, Party A will provide an interpreter to carry out consecutivetranslation.  Likewise, minutes of themeetings of the Board of Directors shall be kept in both English and Chinese,copied to each of Party A and Party B and kept on file at the registered officeof the EJV for review by any director.

 

Article 37       In lieu of ameeting of the Board of Directors, the directors may adopt a writtenresolution.  Such a written resolutionshall be adopted if sent to all members of the Board of Directors and returnedto the registered office of the EJV affirmatively signed by the number ofdirectors necessary to make such a decision as stipulated in Article 34 hereof.

 

9

----

 

Article 38       Directors shallnot be paid a salary by the EJV. However, reasonable transportation and accommodation expenses incurredby a director in connection with his or her attendance at a meeting of theBoard of Directors shall be reimbursed by the EJV on presentation of acceptabledocumentation.  Nothing in the foregoingshall prohibit the EJV from paying a salary to a director where such directorconcurrently acts as an officer or employee of the EJV.

 

# **Chapter 12            TheOperation and Management Organization**

# ** **

Article 39       The EJV shalladopt a management system under which the management organization shall beresponsible to, and under the leadership of, the Board of Directors.  Initially, the management organization of theEJV shall consist of: (1) a General Manager in charge of Operations(hereinafter, the “General Manager”); (2) a Vice General Manager, Finance(hereinafter, the “Vice General Manager, Finance”); and (3) a Vice GeneralManager, Sales (hereinafter, the “Vice General Manager, Sales”).  Party A shall appoint the Vice GeneralManager, Sales, while Party B shall appoint the General Manager and the ViceGeneral Manager, Finance.

 

Article 40       The EJV may electto expand its operation and management organization as business circumstancesevolve and the EJV grows more successful. In the event of any such future expansion, the Board of Directors willadopt a duly made resolution to increase the number of senior management staffof the EJV and will specify the role(s) such individual(s) will assume in thenew management structure.

 

Article 41       Unless otherwisedetermined by the Board of Directors of the EJV, the General Manager shall bethe senior management officer and shall be responsible for day-to-dayoperations and management of the EJV. All Vice General Managers shall report to the General Manager and shallassist him in his work as required.

 

Article 42       Unless otherwisedetermined by the Board of Directors of the EJV, the precise responsibilitiesand powers of the General Manager shall be as set out in the relevantprovisions of the Articles of Association of the EJV (as amended from time totime).  Without limiting the generalityof the foregoing, however, the General Manager, together with a copy of disaggregated by month financial statementsconcerning sales, orders and inventory for the year just ended, shall submit anannual business plan to the Board of Directors for approval by not later than30 November of each fiscal year.

 

Article 43       The GeneralManager shall have the right to sign contracts within type and financial limitsauthorized by the Board of Directors and as arise within the normal course ofbusiness of the EJV.  Without limitingthe generality of the foregoing, the General Manager shall have signingauthority on behalf of the EJV in regard to such matters as contracts for thepurchase of equipment, materials and supplies, and sale of Products toend-users in China and in international markets.

 

10

----

 

Article 44       Each of the ViceGeneral Manager, Finance and the Vice General Manager, Sales shall be appointedby the Board of Directors and shall be responsible both to the General Managerand to the Board of Directors.

 

Article 45       Neither theGeneral Manager nor any other senior management officer of the EJV mayconcurrently hold any position as general manager, manager, or as any officeror employee, of any other economic organization, provided, however, that theGeneral Manager, the Vice General Manager, Finance and the Vice GeneralManager, Sales - where such individuals have been seconded to the EJV by eitherof Party A or Party B - may concurrently be employees of Party A or of Party B.

 

Article 46       The terms andconditions of any secondment of personnel at or above the level of supervisorfrom either of Party A or Party B to the EJV shall be contained in separatePersonnel Secondment Agreements to be signed by whichever of Party A or Party Bis party thereto and kept by the Board of Directors of the EJV for the record.

 

Article 47       In case of graftor serious dereliction of duty on the part of the General Manager, the ViceGeneral Manager, Finance or the Vice General Manager, Sales, the Board ofDirectors shall have the power to dismiss any or all of such senior managementstaff at any time.

 

# **Chapter 13            LaborManagement**

# ** **

Article 48       The number ofstaff and workers to be employed by the EJV at any point in time shall bedetermined by the General Manager in accordance with the requirements of theEJV and the specific conditions of the labor market in Ningbo.

 

Article 49       In accordancewith Chinese laws and regulations, the General Manager will formulate specificplans regarding the recruitment, dismissal, wages, labor insurance, welfare,rewards and penalties of the EJV’s staff and workers and will submit such plansto the Board of Directors for approval.

 

Article 50       The EJV mayrecruit local and expatriate staff and workers in accordance with relevant lawsand regulations of China.  In so doing,the EJV shall recruit and hire such staff and workers based on their educationand skills as determined, in the discretion of the General Manager, throughcompetitive examination.  The EJV, on apreferential basis, shall hire employees currently employed by Party Awherever, in the discretion of the General Manager, it is in the interest ofthe EJV to do so.

 

Article 51       The EJV shalladopt the employment contract system for all its staff and workers. The agreedstandard form of labor contract is attached to this Contract as AppendixD.  The EJV shall sign labor contractswith individual staff members and workers in a form which, to the extentrequired by law, will be reviewed and verified by the labor bureau of theNingbo Municipal Government.

 

11

----

 

If necessary, the EJV may also enter into employment contracts withexpatriate personnel on such terms and conditions as may be approved by theBoard of Directors.

 

Article 52       The salary andother remuneration of EJV personnel (except for senior management staff, as setforth in this Chapter 13, and personnel seconded from either of Party A orParty B to the EJV) will be determined by the General Manager based on theability and skill of such personnel and with reference to pertinent Chinese lawand regulations.  Salary and remunerationdetails shall be set forth in the labor contracts concluded with each employeeof the EJV and, reflecting the changed circumstances of the EJV over time,shall be adjusted based on those then-actual circumstances and the ability andskills of the staff and workers.

 

Article 53       The compensationof the senior management staff of the EJV shall be decided (except forpersonnel seconded to the EJV by either of Party A or Party B, in which casesuch remuneration shall be governed by the applicable Personnel SecondmentAgreement) by the Board of Directors.

 

# **Chapter 14            Purchaseof Equipment**

 

Article 54       In making itspurchases of required raw materials, fuel, parts, means of transportation andarticles for office use etc., the EJV, without regard to point of origin, maypurchase the highest quality products at the lowest price available in eitherthe Chinese or international market.

 

Article 55       In the event theEJV elects to entrust Party B to purchase equipment on the internationalmarket, persons appointed by Party A shall be invited to participate in thepurchasing.

 

# **Chapter 15            Financeand Audit**

 

Article 56       The EJV shallformulate its own financial and accounting systems in light of the stipulationsof relevant Chinese laws and financial accounting regulations, taking intoaccount the specific operations of the EJV and the accounting reportingrequirements of the Parties.  The EJVshall adopt the internationally recognized debit and credit accounting systemto record financial transactions (including the accrual basis ofaccounting).  The accounting system andprocedures to be adopted by the EJV shall be jointly prepared by the General Managerand the Vice General Manager, Finance and shall be submitted to the Board ofDirectors for approval.  Once approved bythe Board of Directors, the accounting system and procedures shall be filedwith the relevant Ningbo bureaux of finance and tax for the record.

 

Article 57       The followingitems shall be covered in the financial account books:

 

(1)           the amount of allcash receipts and expenses of the EJV;

 

12

----

 

(2)           all material andsupply purchases and all income and sales of the EJV;

(3)           the registeredcapital and debt situation of the EJV; and

(4)           the time of payment,increase in and / or assignment of the registered capital of the EJV.

 

The accounting methods adopted by the EJV in each fiscal year shall beconsistent.  Any change in accountingmethods shall be subject to the approval of the Board of Directors andexplained in the next accounting report.

 

Article 58       The fiscal yearof the EJV shall run from 1 January to 31 December of each year.

 

Routine accounting records, vouchers, books and statements of the EJVshall be made and kept in Chinese.  Allfinancial statement of the EJV shall also be made and kept in English.

 

All accounting books, records and statements of the EJV shall be keptat the EJV’s registered office.  Mattersconcerning how long such accounting books, records and statements shall be keptand the method of their ultimate disposal shall be handled in accordance withrelevant Chinese regulations.

 

Article 59       The EJV shalladopt the Renminbi as its bookkeeping base currency, but may also use UnitedStates Dollars or other foreign currencies as supplementary bookkeepingcurrencies.

 

Article 60       The EJV shallseparately open foreign currency and Renminbi bank accounts at bank(s)authorized to accept deposits in China from foreign investmententerprises.  The EJV may open bankaccounts outside of China in accordance with relevant Chinese laws andregulations.

 

Article 61       All checks,drafts or other orders for payment of money, notes or other evidence ofindebtedness, issued in the name of or payable by the EJV, shall be signed orendorsed by such person(s) and in such manner as the Board of Directorsdetermines from time to time by resolution.

 

Article 62       Every month, andwithin the first three months of each fiscal year, the Vice General Manager,Finance shall compile a balance sheet and a profit and loss statement for thepreceding year, and submit them to the General Manager for review and approval.The Vice General Manager, Finance shall also prepare, on a quarterly basis andwithin thirty (30) days of the end of the EJV’s fiscal year, related financialstatements of the EJV in accordance with U.S. generally accepted accountingprinciples (“U.S. GAAP”).  Promptly afterhis receipt and review, the General Manager shall provide copies of the saidfinancial statements to the Parties and summaries of such statements to theBoard of Directors.

 

13

----

 

The Board of Directors shall engage a major international accountingfirm registered in China to be the EJV’s auditor and to examine and verify theEJV’s financial accounting. The results of the auditor’s examination shall bereported to the Board of Directors and the General Manager.  The EJV shall submit to the Parties and toeach director the audited annual accounts together with the audit report of theauditor within seven (7) working days after such report is issued.

 

If a Party wishes to audit the EJV’s accounts, such Party shall, notless than thirty (30) days before the expected audit date, inform the EJV ofthe purpose and scope.  The audit shallbe conducted at such Party’s expense through an internationally reputableindependent firm of accountants registered in China.  If, however, the results of any such auditare significantly different from that conducted by the EJV’s auditor and areaccepted by the Board of Directors, the expense shall be borne by the EJV. Suchother auditor shall keep confidential all documents audited by him.  The EJV shall permit such other auditor tohave access to the books and records of the EJV and shall provide the necessaryoffice space and facilities to enable such examination to be carried outeffectively.  The results of such auditshall be reported to the Board of Directors, the General Manager and the EJV’sauditor.

 

Article 63       All foreignexchange matters of the EJV shall be handled in accordance with relevantChinese foreign exchange regulations in effect from time to time.

 

# **Chapter 16            Distributionof Profits and Taxes**

 

Article 64       Unless the Boardof Directors decides otherwise, one hundred (100) percent of the after-taxprofits of the EJV remaining after contributions to the statutory funds setforth in this Chapter 16 shall be distributed annually to the Parties in exactproportion to their contributions to the registered capital of the EJV.Accordingly, the distribution of profits to the parties will be in thefollowing ratio:

 
| To Party A | fifty percent | To Party B | fifty percent |
|------------|---------------|------------|---------------|

 

Undistributed distributable profits from prior years may bedistributed, in the same ratio, together with those of the current year.

 

Article 65       The EJV shallmake timely payment of taxes, and apply for reduction or exemption of taxes, inaccordance with the provision of relevant Chinese laws and regulations.  Any duty payable in China shall be paid inRenminbi.  The EJV may also apply forpreferential treatment under relevant Chinese laws and regulations.  At the end of each fiscal year, the ViceGeneral Manager, Finance shall prepare such information as shall be necessaryfor the preparation of any tax returns and statements as may be required by U.S. law.  This shall include furnishingParty B with certified copies of government receipts for income taxes paidwithin China.

 

14

----

 

If any new laws, decrees, rules, regulations or amendments arepromulgated which provide more favorable treatment to Sino-foreign co-operativejoint venture companies operating in Ningbo Municipality than under existing laws,decrees, rules and regulations or amendments thereto, the EJV shall be entitledto the benefit of such new laws, decrees, rules, regulations or amendments.

 

The staff and workers of the EJV shall pay individual income taxaccording to the relevant and published individual income tax laws andregulations of China.

 

Article 66       The EJV shall setaside a certain amount of money from its after-tax profits each year for theReserve Fund, the Staff and Workers’ Bonus and Welfare Fund and the EnterpriseDevelopment Fund in accordance with the stipulations in the EJV Law.  The amount to be set aside annually for thesethree funds shall be discussed and decided by the Board of Directors accordingto the actual business situation of the EJV.

 

When the cumulative aggregate of the funds in the Reserve Fund andEnterprise Development Fund equals fifty (50) percent of the registered capitalof the EJV, the EJV need not make further allocations to these funds.

 

Within the limits of the laws and regulations of China, all moneyplaced in the three funds maintained by the EJV as provided in this Article 67shall be placed by the EJV with internationally recognized banks or financialinstitutions in China or abroad providing the best available terms, as approvedby the Board of Directors.

 

Article 67       The Board ofDirectors may distribute the profits of the EJV as and when it deemsappropriate.  Before declaring any profitdistribution, there may be set apart out of the profit of the EJV available fordistribution such sum or sums as the Board of Directors from time to time inits discretion considers proper for working capital or as a reserve fund tomeet contingencies or for such other purposes permitted by law as the Board ofDirectors believes to be in the best interests of the EJV.

 

Article 68       Party B shallhave the right to receive its share of the profits of the EJV in U.S. Dollarsor other freely convertible foreign currency acceptable to Party B.  The amount in the relevant foreign currencyshall be calculated at the base exchange rate set by the People’s Bank of Chinaand shall be paid on the day it is declared.

 

# **Chapter 17            Insurance**

 

Article 69       Subject to thedecision of the Board of Directors, the EJV shall purchase various types ofinsurance from insurance companies permitted by Chinese law to provideinsurance coverage to foreign investment enterprises.  Such insurance coverage may include propertyinsurance, product liability insurance, third party liability insurance and otherrelevant insurance coverage in order to protect the EJV, its employees, agentsand other appropriate parties from claims.

 

15

----

 

# **Chapter 18            Durationof the EJV**

 

Article 70       The EJV, unlessterminated earlier in accordance with Chapter 19 below, shall have a term(hereinafter, the “EJV Term”) of twenty-five (25) years beginning from the dateof issuance of the EJV’s initial business license by the Ningbo Administrationof Industry and Commerce.

 

The effective term of this Contract shall begin when it is executed bythe Parties and approved by the Original Examination and Approval Authority,and shall end when the EJV Term ends, or upon dissolution of the EJV if thisContract is terminated early.

 

Chapters 18, 25 and 26 shall survive termination of this Contract.

 

Article 71       At least two (2)years before the EJV Term expires, the Parties shall hold consultations todiscuss extension of the EJV Term.  Itthe Parties agree to extend the EJV Term, an application for such extensionshall be submitted to the Original Examination and Approval Authority forapproval not less than six (6) months before the EJV Term expires.  Any extension of the term that is approvedshall be registered with the Ningbo Administration of Industry and Commerce.

 

Dissolution of the EJV upon early termination or at expiration of theEJV Term shall be subject to the provisions of Chapters 19 and 23.

 

# **Chapter 19            EarlyTermination and Dissolution**

 

Article 72       The EJV may bedissolved and this Contract terminated before the EJV Term expires if any ofthe following events or circumstances occurs:

 

(1)           not earlier than twoyears following issuance to the EJV of a business license, the EJV has incurredheavy losses and is unable to continue operations (for purposes of this Chapter19, the term “heavy losses” shall mean that the accumulated losses of the EJVhave reached seventy-five (75) percent or more of the registered capital of theEJV in any calendar year);

 

(2)           the EJV is unable tocontinue operations due to the occurrence of an Event of Force Majeure, asprovided in Chapter 24;

 

(3)           the EJV is unable tooperate due to the loss of its business license for its core business (or itsinability to renew such license), or it is prohibited from pursuing its corebusiness (pursuant to any regulatory, judicial action or otherwise), orpermanently cannot pursue it in a commercially practicable way due to a changein the laws of China;

 

(4)           a Party declaresitself, or is declared, bankrupt and is unable to continue business operations;

 

16

----

 

(5)           the Partiesunanimously agree to early dissolution of the EJV;

 

(6)           the Parties do notreach agreement on the adjustments to the economic benefit of the damaged Partyas provided under Article 92 within ninety (90) days of the request by thedamaged Party for such adjustments, and the damaged Party gives the other Partywritten notice that it wishes the Parties to consider early termination;

 

(7)           the EJV ceases tohave the right to maintain foreign exchange bank account(s) or to have accessto sufficient foreign exchange to perform its foreign exchange paymentobligations (including royalties, profits, fees or other payments owed to PartyB), through the designated foreign exchange banks or other legal means as providedunder Chinese law, and Party B gives Party A written notice that it wishes theParties to consider early termination;

 

(8)           one Party hasbreached this contract, has been given notice by the other Party, and has nottimely remedied the breach, as set forth in Article 80; or

 

(9)           the Parties areunable to resolve a dispute that interferes with the EJV’s ability to besuccessful, despite good faith efforts of the Parties.

 

Article 73       When any eventset out in Article 73 (1) to (8) occurs, either Party may request that aspecial Board of Directors meeting be convened to discuss early dissolution ofthe EJV.  The Chairman shall convene suchmeeting within thirty (30) days of the receipt of such request.  Each Party shall ensure that its directorsattend such meeting in person or by proxy, discuss the alternatives, and usetheir best efforts to achieve a solution acceptable to both Parties by adoptingby unanimous vote one of the following solutions:

 

(1)           dissolution andliquidation of the EJV pursuant to Chapter 19;

 

(2)           purchase by theParty opposing dissolution, or by its designee, or by a third party or partiesacceptable to it, of the equity interest of the Party favoring dissolution,such equity interest to be valued using the method set out in Articles 85 and86;

 

(3)           sale of the EJV on agoing concern basis to a third party or parties at a value to be agreed betweenthe Parties and such third-party purchaser(s);

 

(4)           another course ofaction acceptable to the Parties.

 

If the Board of Directors unanimously adopts one of the abovesolutions, the Chairman and vice Chairman of the Board of Directors, on behalfof the EJV, shall (i) promptly give the Original Examination and ApprovalAuthority, and other Chinese government departments who must approve, writtennotice of the solution adopted and request approval; or (ii) use their bestefforts to obtain such approval.  If (i)the directors do not adopt any of the solutions given above, (ii) such specialBoard of Directors meeting cannot be held within three (3) months of a Party’srequest for it pursuant to this Article, 

 

17

----

 

or (iii) the solution adopted by the Board of Directors cannot becarried to completion within six (6) months of the special Board of Directorsmeeting, then, unless the Parties otherwise agree: (i) the Board of Directorsshall be deemed to have unanimously approved the dissolution and liquidation ofthe EJV;  (ii) each Party shall ensurethat its directors promptly approve a resolution to that effect;  and (iii) the Board of Directors or, on itsbehalf, the Party favoring dissolution, may request the Original Examinationand Approval Authority to approve liquidation and dissolution of the EJV.

 

Article 74       Notwithstandingthe provisions of Article 74, if the event in Article 73 (9) occurs, andprovided that Chinese law in force at the date of dissolution permits a foreigninvested enterprise having the purpose and business scope of the EJV to be licensedand operated as a wholly owned foreign enterprise, any Party (hereinafter, the “Offeror”)may, before application is made to the Original Examination and ApprovalAuthority to liquidate the EJV, make an irrevocable offer (hereinafter, the “Offer”)to the other Party (hereinafter, the “Offeree”) by giving written notice of itto the other Party; provided, however, that if neither Party makes an Offer,the matter will be resolved in accordance with Article 74.  The Offer shall specify a purchase price,payable in cash in United States Dollars if Party A is the purchaser or inRenminbi if Party B is the purchaser. The Offeree may elect either to:

 

(1)           sell its wholeinterest in the EJV to the Offeror; or

 

(2)           purchase the Offeror’swhole interest in the EJV at a pro-rata price equal to the purchase pricespecified in the Offer multiplied by the ratio of the Offeror’s equity interestto the Offeree’s equity interest.

 

The Offeree shall give the Offeror written notice of its electionwithin thirty (30) days of receiving the Offer, and shall be deemed to haveelected to sell its interest if it fails to give such notice.  All necessary steps in connection with thetransfer of any interest, and payment therefor, shall be completed as soon aspossible, subject to the review and approval of the Original Examination andApproval Authority.  If more than oneOffer is made, such Offers shall be handled in accordance with the principle, “firstin time, first in right”.

 

Article 75       If Party B’sinterest in the EJV is nationalized or expropriated, or if the assets or amaterial part of the assets of the EJV have been taken over by a governmententity, Party B shall have the right to unilaterally terminate this Contractand dissolve the EJV, and Party B shall be equitably compensated in accordancewith the law of China, including relevant international treaties to which Chinais a party, and international practice.

 

# **Chapter 20            Representationsand Warranties of the Parties**

 

Article 76       Party A herebyrepresents and warrants to Party B as follows:

 

18

----

 

(1)           Party A is a limitedliability company duly organized and validly existing as an enterprise legalperson under the laws of China;

 

(2)           Party A has fulllegal right, power and authority to execute this Contract and all contracts anddocuments referred to in this Contract to which Party A is a Party and toobserve and perform its obligations under this Contract and those contracts anddocuments;

 

(3)           Party A has takenall appropriate and necessary action to authorize the execution of thisContract and all of the contracts and documents referred to in this Contract towhich Party A is a Party and to authorize the performance and observance of theterms and conditions of this Contract and those contracts and documents; and

 

(4)           Party A has obtainedall consents, approvals and authorizations necessary to validly execute thisContract and all of the contracts and documents referred to in this Contract towhich Party A is a Party and to observe and perform its obligations under thisContract and those contracts and documents; provided, however, that thisContract is subject to the approval of the Original Examination and ApprovalAuthority before it becomes effective.

 

Article 77       Party B herebyrepresents and warrants to Party A as follows:

 

(1)           Party B is acorporation duly organized and validly existing under the laws of the State ofDelaware;

 

(2)           Party B has fulllegal right, power and authority to execute this Contract and all of thecontracts and documents referred to in this Contract and to which Party B is aParty and to observe and perform its obligations under this Contract and thosecontracts and documents;

 

(3)           Party B has takenall appropriate and necessary action to authorize the execution of thisContract and of all of the contracts and documents referred to in this Contractto which Party B is a party, and to authorize the performance and observance ofthe terms and conditions of this Contract and those contracts and documents;and

 

(4)           Party B has obtainedall consents, approvals and authorizations necessary to validly execute thisContract and all of the contracts and documents referred to in this Contract towhich Party B is a party, and to observe and perform its obligations under thisContract and those contracts and documents; provided, however, that thisContract is subject to the approval of the Original Examination and ApprovalAuthority before it becomes effective.

 

19

----

 

**Chapter 21            Non-Competition**

 

Article 78       Party A agreesthat it, its successors and assigns, its subsidiaries and affiliates, shallnot, directly or indirectly, whether as an investor, co-venturer, technologylicensor, technology licensee, agent, distributor, consultant or otherwisehowsoever, during the EJV Term, including any extensions of the original term,maintain, establish, or engage in a business, operation or plant in China, orparticipate in the production and / or sale of any products which (1) use the same brandnames, or use any confusingly similar brand names, of Party B, or of anyproducts of a similar style to those of Party B, that Party A had not sold ineither the domestic Chinese or international markets prior to the date ofexecution of this Contract , or (2) use the technology transferred pursuant toChapter 7 of this Contract, or any improvements to said technology, to improveParty A’s existing products or to produce new products ..

 

# **Chapter 22            Breachand Penalties for Breach**

 

Article 79       If a Party failsto perform any of its material obligations under this Contract, or if anyrepresentation or warranty of that Party under this Contract is materiallyuntrue or inaccurate, then that Party (hereinafter, the “Breaching Party”) hasbreached this Contract.  In such case,the Party performing this Contract (hereinafter, the “Performing Party”) maygive the Breaching Party notice that it has breached this Contract and shouldremedy such breach within sixty (60) days of the date of such notice.  If the breach has not been remedied by theend of such sixty-day period, the Performing Party may give the OriginalExamination and Approval Authority written notice that the Breaching Party hasbreached this Contract and request early dissolution of the EJV as provided inChapter 19 hereof.

 

Article 80       In the event of abreach of this Contract, the Breaching Party shall be liable to the PerformingParty for direct (but not consequential) damages incurred as a result of suchBreaching Party’s breach of contract. The rights provided for in Article 80 shall be in addition to any otherremedies available to the Performing Party. Termination of this Contract in the exercise of such rights shall notrelieve either Party from any obligations accrued to the date of suchtermination or relieve the Breaching Party from liability for damages to thePerforming Party for breach of this Contract. Waiver by either Party of one or more defaults shall not deprive suchParty of a right to terminate this Contract arising by reason of any subsequentdefault.

 

Article 81       Should a Partynot contribute on time to the EJV its subscribed amount of registered capitalstipulated in Article 11 hereof , such Party shall pay the EJV liquidateddamages for default at the rate of one (1) percent per month of the overdueamount, calculated based on the number of days the amount is overdue, providedthat the liquidated damages are payable only when the amount is one (1) monthor more overdue.  If no payment has beenmade, or if full payment of the amount overdue has not been made in three (3)months, the Party in default shall be deemed to have waived its right tosubscribe to the capital overdue. Besides claiming from the defaulting Party for the EJV the cumulativethree (3) percent on the subscribed amount overdue as liquidated damages fordefault, the non-defaulting Party may also subscribe to such overdue amount,and 

 

20

----

 

require the defaulting Party to compensate it for its direct lossessustained as a result of the defaulting Party’s breach.  If the non-defaulting Party elects tosubscribe to such overdue amount pursuant to this Article, each Party shallensure that its directors approve such subscription and shall use its bestefforts to obtain the approval of the Original Examination and ApprovalAuthority.

 

# **Chapter 23            Terminationand Dissolution**

 

Article 82       Upon approval by the Board of Directors of early dissolutionof the EJV, the EJV shall notify the Original Examination and ApprovalAuthority to obtain approval for liquidation of the EJV.  Within seven (7) days from the date of suchapproval or the expiration of the EJV Term, the Board of Directors shall notifythe relevant authorities as required by law. Within fifteen (15) days from the date of such approval or theexpiration of the EJV Term, the Board of Directors shall appoint a LiquidationCommittee.

 

TheLiquidation Committee shall be composed of five (5) members appointed by theBoard of Directors, of which two (2) shall be nominated by Party A and three (3)by Party B.  The Liquidation Committeeshall include a director, who shall be nominated by Party B.

 

Membersof the Liquidation Committee may be directors or senior employees of the EJV,or other qualified persons such as accountants and lawyers qualified in thePRC.

 

Article 83       Within ten (10) days of the appointment of the LiquidationCommittee, the Liquidation Committee shall notify in writing the creditors ofthe EJV to report the amounts the EJV owes the creditors.  The Liquidation Committee shall also publishannouncements of the liquidation in newspapers in accordance with the relevantlaws and regulations.

 

TheLiquidation Committee shall carry out its duties according to applicable law,and in particular shall:

 

1.                                       conduct an overallinventory of the EJV’s property, creditors’ rights and liabilities;

 

2.             prepare a balance sheet andproperty inventory;

 

3.                                       value all the propertyof the EJV at fair market value;

 

4.             prepare a liquidation plan;

 

5.                                       apply the assets ofthe EJV to satisfy the costs of the liquidation and the EJV’s liabilities,including all obligations under the Ancillary Agreements;

 

6.             carry out other duties required byrelevant laws and regulations.

 

21

----

 

Thereafter,the remaining assets of the EJV may be distributed to the Parties in accordancewith the ratio of their capital contributions; provided, however, that anyproperty to be distributed to the Breaching Party may be used to pay for thedamages sustained by the Performing Party. Damages payable to Party B and Party B’s share of any distribution shallbe paid in foreign exchange.  The Partiesmay elect to receive their respective share of any distribution of assets inkind, including machinery and equipment, with Party A being given preferencewith respect to machinery and equipment made in the PRC and Party B being givenpreference with respect to machinery and equipment made outside the PRC.

 

Article 84       If at the termination or expiration of this Contract the EJVis actively engaged in business, the value of the EJV may, on written requestof either of the Parties, be established by three (3) qualified appraisers, one(1) to be appointed by Party A, one (1) to be appointed by Party B and thethird one to be appointed by the two (2) appraisers appointed by theParties.  If a Party fails to appoint anappraiser within sixty (60) days of being requested to do so by the otherParty, the appraiser appointed by such Party shall appoint an appraiser onbehalf of the Party failing to make such an appointment.  Such appraisers shall each value the EJV on agoing-concern basis with reference to a co-operative joint venture withfacilities comparable to those of the EJV, which co-operative joint venture isqualified to continue to carry on its business in the jurisdiction in which itis located.  In making such a valuation,the appraisers shall make full provision for and take into account the debtsand liabilities of the EJV.

 

Article 85       If one or all of the three values given by the three (3)appraisers is/are not within ten (10) percent of the nearest of the other twovalues (using the lower of the two values being compared as the numerator, andthe higher as the denominator, when calculating the ten (10) percent), thenthat value or values shall be discarded. If no values are discarded, the EJV’s value shall be the average of thethree values.  If one value is discarded,the EJV’s value shall be the average of the remaining two values.  If all three are discarded, then newappraisers shall be appointed as provided in the previous paragraph.

 

Eitherbefore or after the value of the EJV has been established, the Parties mayagree that one Party shall purchase the interest of the other at a pro-rataprice equal to the value of the EJV multiplied by the selling Party’s equityratio in the EJV.  If Party A buys PartyB’s interest, payment shall be made in convertible currency.  If neither Party is willing to buy at thevalue established by the appraisers or at any other price agreed upon, then theParties shall sell the EJV to a third party at the appraised value or for abetter price, or if this cannot be done, then at any other favorable price to which theParties agree.  Failing this, the EJVshall be dissolved and liquidated as provided in Chapter 23.

 

**Chapter 24            ForceMajeure**

 

Article 86       Should either Party be prevented from performing itsobligations under this Contract by force majeure, such as earthquake, epidemic,typhoon, flood, or other 

 

22

----

 

acts of nature, fire, explosion, acts ofcivil or military authority including the inability to obtain any requiredexport licenses, labour disputes, riots, inability to obtain raw materials,spare parts, war or other unforeseen event beyond the prevented Party’sreasonable control (hereinafter, an “Event of Force Majeure”), the preventedParty shall give the other Party written notice without delay, and withinfifteen (15) days of the event provide detailed information about and documentsevidencing the event, explaining the reasons for its inability to perform, orfor its delay in the performance of, all or part of this Contract.

 

Article 87       If an Event of Force Majeure occurs, neither Party shall beresponsible for any damage, increased costs or loss which the other Party maysustain by reason of its inability to perform or delayed performance, and suchinability or delay shall not be deemed a breach of this Contract.  The Party claiming force majeure shall takeappropriate means to minimize or remove the effects of force majeure and,within the shortest possible time, attempt to resume the performance affectedby the Event of Force Majeure.

 

### **Article88**       Should an Event of Force Majeure or the effects of an Eventof Force Majeure prevent one or both Parties from performing part or all of itsor their obligations under this Contract for a period of 120 days or more, thenthe Parties shall, through consultations, decide whether to terminate thisContract, to exempt one or both Parties from part of its or their obligationsunder this Contract, or to delay the performance of such obligations inaccordance with the effects of the Event of Force Majeure.

### ** **

### **Chapter 25            ApplicableLaw**

 

Article 89       This Contract shall be governed and protected by the laws ofthe PRC.  This Contract shall beperformed in accordance with its terms.

 

Article 90       If, during the term of this Contract, any relevant authorityin the PRC adopts any law, regulation, rule or policy, or a treatment isextended to another equity or coperative joint venture company or investor inthe high-quality gas equipment manufacturing business in the PRC specified inArticle 6 which is more favorable than the laws, regulations, rules, policiesor a treatment previously applicable to the EJV and/or either Party (includingreducing or eliminating filing, reporting, registration or approvalrequirements), then the EJV and/or the Parties as the case may be shall beentitled to receive, or apply (if application is necessary) to the appropriategovernmental agency or authority to receive the benefit of such law,regulation, rule, policy or treatment.

 

Article 91       If, during the term of this Contract, an adverse materialchange occurs to either Party’s economic benefits derived from this Contractbecause any relevant authority in the PRC adopts new laws, regulations, rulesor policies, amends or reinterprets existing laws, regulations, rules orpolicies, or alters its treatment of either Party, the Parties shall promptlyconsult with each other and use their best efforts to 

 

23

----

 

implement any adjustments necessary tokeep the damaged Party’s economic benefits derived from this Contactsubstantially equivalent as they would have been if such laws, regulations,rules, policies or treatments had not been adopted, amended, reinterpreted oraltered.

 

### **Chapter 26            Settlementof Disputes**

 

Article 92       Subject to the Parties’ right to terminate this Contract, inthe event a dispute arises in connection with the interpretation orimplementation of this Contract and its Attachments, any Party may notify theother Party in writing of thesubstance of the dispute and of its desire to attempt to reach an amicablesettlement, in which event the Parties shall endeavor for a period of onehundred and eighty (180) days after the date of such notice to reach anamicable settlement of the dispute.

 

Article 93       If no mutuallyacceptable settlement of a dispute is made within the one hundred and eighty(180) day period, then any Party may submit the dispute for final settlement byarbitration conducted in accordance with the Singapore InternationalArbitration Center Rules as presently in force. The arbitration award shall befinal and binding upon the Parties. Any competent court shall enforce suchaward. Such arbitration shall be conducted as follows:

 

(a)          the appointing authority shall be SingaporeInternational Arbitration Center;

(b)         the arbitrators may refer to both theEnglish and Chinese texts of this Contract;

(c)          a daily transcript in Chinese and English ofsuch proceedings shall be prepared;

(d)         there shall be three (3)arbitrators. Each Party shall select one arbitrator. The thirdarbitrator shall be a person selected by the arbitration authority andhe shall serve as Chairman of the panel;

(e)          the place of arbitration shall beSingapore;  and

(f)            the costs of arbitration, including travelexpenses and attorney fees, shall be borne by the losing party, unlessotherwise determined by the arbitration award.

 

Article 94       If any Partyfails to observe the terms of an arbitration award, the other Partymay apply to have the award enforced in any court having jurisdiction over theParty against which the award has been rendered.

 

Article 95       In any arbitration proceeding, any legal proceeding to enforceany award resulting from an arbitration proceeding and in any legal actionbetween the Parties pursuant to or relating to this Contract, each Partyexpressly waives the defense of sovereign immunity and any other defense ofexemption from suit, judgment or executive order based on the fact orallegation that it is a party, agency or instrumentality of or representing agovernment.

 

24

----

 

Article 96       During the period when a dispute is being resolved, theParties shall in all other respects continue their implementation of thisContract.

 

**Chapter 27            Language**

 

Article 97       Five originals of this Contract shall be written in each of aChinese language version and an English language version.  Both the Chinese language and Englishlanguage versions will be of equal effect. In case of any conflict between thetwo language versions, the Chinese language version shall govern. In suchcircumstances, the English version may be considered in helping to construe thereal intent of the Parties. Each Party shall keep one original Chinese and oneEnglish language version. The three remaining original language versions, ineach of Chinese and English, shall be submitted to the Original Examination andApproval Authority.

 

**Chapter 28            Effectivenessof the Contract, Amendment and Miscellaneous**

 

Article 98       The Appendices referred to in and attached to this Contractare an integral part of this Contract. They are as follows:

 

AppendixA          Articles of Association

 

AppendixB           Technical License Agreement

 

AppendixC           Lease Agreement

 

AppendixD           Form of Employment Contract

 

ThisContract with its Appendixes constitutes the entire agreement between theParties with respect to the subject matter of this joint venture and supersedeall previous oral and written agreements, contracts, understandings andcommunications of the Parties in respect of the subject matter of thisContract.

 

Article 99       This Contract with its Appendixes shall be submitted forapproval to the Original Examination and Approval Authority and shall come intoforce beginning from the date on which the Original Examination and ApprovalAuthority issues its approval reply. Party A shall give Party B written notice immediately upon receiving theapproval reply, and provide Party B with a copy of it.  The same shall apply to receipt of theapproval certificate.

 

Article 100:    If: (i) this Contract is not approved within four (4) monthsfollowing the date of submission; or (ii) the Original Examination and ApprovalAuthority requires the Parties to amend this Contract in a manner that isunacceptable or imposes conditions that are unacceptable to one or bothParties, then either Party may terminate the effectiveness of its signature ofthis Contract by written notice to the other Party, and upon receipt of suchnotice this Contract shall be null and void.

 

25

----

 

Article 101     Any amendment of this Contract shall come into force only when awritten agreement is signed by Party A and Party B and approved by the OriginalExamination and Approval Authority.

 

Article 102     The invalidity of any provision of this Contract shall notaffect the validity of any other provision of this Contract.

 

Article 103     A Party’s failure to exercise any right, power or interest underthis Contract shall not operate as a waiver of it, and any single or partialwaiver of any right, power or interest shall not preclude exercise of any otherright, power or interest.

 

Article 104     All notices between the Parties shall be written in Chinese andin English and delivered, either by messenger, registered airmail, fax ortelegram, to the following addresses:

 
| Address of Party A: |   | No. 518 Songjiang Zhong Road              |
|---------------------|--------|-------------------------------------------|
|                |   | Ningbo  315192, Zhejiang Province, PRC    |
|                |   | Attention:  Mr.  Chen Ding Long |
|                |   | Fax:  86-574-8821  5078         |
|                |   |                                      |
| Address of Party B: |   | 16052 Swingley Ridge, Suite 300,          |
|                |   | St. Louis, MO 63017,                      |
|                |   | United States of America.                 |
|                |   | Attention:  General Counsel               |
|                |   | Fax:  (1) 636- 728 3011                   |

 

Noticeshall be deemed delivered on the following dates:

 

1.                                       By messenger, on the date of delivery;

2.                                       By registered airmail, seven (7) days after it is mailed (asindicated by the postmark);

3.                                       By fax or telegram, on the first working day after the date ofsending.

 

Eitherof Party A or Party B may change its address for receiving notices at any timeby giving the other Party written notice of such change pursuant to thisArticle 105.

 

Article 105     Neither Party shall make any declarations, announcements, ordisclosures to the public with respect to this Contract, the relationship betweenthe Parties or the business of the EJV without first obtaining the writtenconsent of the other Party.

 

### **Article106     This Contract is signed by theduly authorized representatives of Party A and Party B on this**                 day of December, 2004.

 

26

----

 
| NINGBO LONGXING GROUP CORPORATION LIMITED |
|-------------------------------------------|
|                                      |
| By:                                       | \s\ Chen Ding Long |   |
|                                      |   |   |
| Name:                                     | Chen Ding Long |   |
|                                      |   |   |
| Title:                                    | President |   |
|                                      |
|                                      |
| **THERMADYNE HOLDINGS  CORPORATION**      |
| ** **                                |
| By:                                       | \s\ Paul D. Melnuk |   |
|                                      |   |   |
| Name:                                     | Paul D. Melnuk |   |
|                                      |   |   |
| Title:                                    | Chairman and Chief Executive Officer |   |

 

27

----

 

**LIST OF APPENDICES**

 

AppendixA          Articles of Association

 

AppendixB           Technical License Agreement

 

AppendixC           Lease Agreement

 

AppendixD           Form of Employment Agreement

 

----