Document:

Exhibit 10.2

    
      

    

    

      EXHIBIT
        10.2

       

      
        CONSULTING
          AGREEMENT

         

      

      This
        Consulting Agreement (the “Agreement”) dated as of November 17, 2006 is by and
        between OrthoLogic Corp., a Delaware corporation (the “Company”), and James T.
        Ryaby, Ph.D. (“Consultant”).

      

      RECITALS

      

      A.    The
        Company and Consultant are parties to a Separation Agreement and Release
        dated
        the date hereof (the “Separation Agreement”), pursuant to which Consultant
        ceased to be an officer and employee of the Company.

      

      B.    The
        Company desires to engage Consultant, and Consultant desires to accept such
        engagement, on the terms and conditions set forth in this
        Agreement.

      

      C.    The
        Company and Consultant are parties to an Invention, Confidential Information
        and
        Non-Competition Agreement dated February 9, 1999 (“Invention Agreement”), which
        shall survive the termination of Consultant’s employment and the entry into this
        Agreement and shall remain in full force and effect

      

      AGREEMENT

      

      In
        consideration of the conditions and covenants contained herein, the parties
        agree as follows:

      

      1.    Engagement. 
        The Company hereby engages Consultant and Consultant hereby accepts such
        engagement with the Company, on the terms and conditions set forth in this
        Agreement (the “Engagement”).

      

      2.    Duties
        and Performance.
        

      

      (a)    During
        the Engagement, Consultant shall report to the President of the Company and
        shall perform such consulting services for the Company as the Company (acting
        through its President) may reasonably request in writing. During the Engagement,
        Consultant shall devote substantially all of his business time, attention,
        and
        energies to the Company on an exclusive basis, shall give undivided loyalty
        to
        the Company and shall use his best efforts to advance the interests of the
        Company; provided, that this Section 2(a) shall not prohibit Consultant from
        engaging in consulting or other services for another entity for up to five
        days
        per calendar month after the expiration of the Initial Term if such consulting
        or other services are disclosed in writing in advance to the
        Company.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b)    Consultant
        shall not have, nor shall Consultant represent to any party that Consultant
        has,
        any power or authority to enter into written or oral agreements on behalf
        of the
        Company or otherwise bind the Company.

      

      (c)    Consultant
        shall provide the services hereunder at Consultant’s home or at one or more
        other offsite locations to be determined by Consultant, at Consultant’s expense,
        if any, subject to Section 4(c), below. Consultant shall not have access
        to the
        Company’s internal IT network. Information and documents that Consultant
        believes are necessary to perform his services hereunder shall be provided
        to
        Consultant, in the discretion of the Company, upon written request to the
        Company’s President. Consultant shall not visit the Company’s premises except
        upon, and in accordance with, the invitation of the Company’s President or
        Executive Chairman. 

      

      (d)    Consultant
        shall be responsible for providing, at Consultant’s expense, all necessary
        equipment and supplies for the performance of his services
        hereunder.

      

      3.    Term. 
        The Engagement shall commence on the date hereof and, unless earlier terminated
        as provided herein, shall continue until and expire on December 31, 2007
        (the
“Term”). The Company and Consultant shall meet on or about September 30, 2007 to
        discuss extending the Term beyond December 31, 2007.

      

      4.    Fees,
        Benefits and Expenses.

      

      (a)    Ten
        days
        after the signing of this Agreement, the Company shall pay to Consultant
        a
        one-time administrative payment in the amount of $40,000 to cover Consultant’s
        start-up expenses.

      

      (b)    During
        the Term, the Company shall pay to Consultant a consulting fee at the rate
        of
        $250,000 per year, subject to required withholdings, if any, payable in arrears
        in equal monthly installments or, at the discretion of the Company, on the
        Company’s regular employee payroll schedule (the “Consulting Fee”).

      

      (c)    The
        Company shall pay or reimburse Consultant for all reasonable travel and other
        expenses incurred or paid by Consultant in connection with the performance
        of
        services under this Agreement, provided that such expenses are approved in
        advance in writing by the Company. Payment shall be made within 30 days
        following the presentation of expense statements or vouchers and supporting
        information consistent with the Company’s reimbursement policies; provided,
        that the
        Company shall not in any event reimburse Consultant for (i) first class or
        business class travel or (ii) entertainment expense not specifically approved
        in
        writing in advance by the Company.

      

      (d)    The
        Company shall promptly reimburse Consultant for the cost of Consultant’s
        purchase under COBRA of health and dental insurance, including dependent
        care
        coverage, during the Term (the “Benefit Reimbursement”). Consultant shall be
        responsible for making all necessary elections, making the necessary payments
        and providing reasonable documentation to the Company evidencing such payments.
        

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (e)    Except
        as
        expressly provided in this Section 4, the Company shall have no obligation
        to
        provide any health, welfare, retirement, employee or other benefits to
        Consultant.

      

      5.    Termination. 
        Consultant’s Engagement by the Company shall terminate as set forth below. No
        termination shall affect any rights or obligations accruing prior thereto
        or any
        continuing obligations of the parties hereunder.

      

      (a)    The
        Engagement shall be terminable by the Company during the first 123 days of
        the
        Term (the “Initial Term”) only for cause. Thereafter, the Engagement will be
        terminable by either party with or without cause upon 60 days prior written
        notice. If the Company terminates the Engagement during the Initial Term
        for
        cause, the Company shall pay Consultant the accrued and unpaid Consulting
        Fee,
        Benefit Reimbursement and expense reimbursements through the date of such
        termination and the Company shall have no further obligation to pay any amounts
        or provide any benefits hereunder. If the Company terminates the Engagement
        during the Initial Term without cause, the Company shall pay Consultant the
        accrued and unpaid expense reimbursements through the date of such termination
        and the Consulting Fee and Benefit Reimbursement for the remainder of the
        Initial Term plus 60 days, after which the Company shall have no further
        obligation to pay any amounts or provide any benefits hereunder. If the Company
        terminates the Engagement after the Initial Term with or without cause, the
        Company shall pay Consultant the accrued and unpaid Consulting Fee, Benefit
        Reimbursement and expense reimbursements through the later of the date of
        such
        termination or 60 days after the expiration of the Initial Term and the Company
        shall have no further obligation to pay any amounts or provide any benefits
        hereunder.

      

      (b)    Either
        party may terminate the Engagement for cause upon 15 days prior written notice,
        which shall specify the cause for the termination. Cause shall include any
        of
        the following occurring after the date hereof: (i) material neglect of duties,
        (ii) material violations of corporate policies (including confidentiality
        and
        insider trading policies) established by the Company, (iii) material breach
        of
        the Separation Agreement or the Invention Agreement or any other material
        agreement between Consultant and the Company and (iv) commission of one or
        more
        acts of dishonesty that negatively affect the Company or Consultant’s standing
        in the scientific community or that challenge Consultant’s research or
        scientific integrity. However, if the reason for termination is curable,
        and the
        party receiving notice cures the specified cause during such 15-day period,
        the
        Engagement shall not terminate.

      

      (c)    Additionally,
        the Engagement shall terminate immediately upon the death or disability of
        the
        Consultant. For this purpose, the Consultant shall be deemed to be disabled
        if
        he is unable substantially to perform the duties required by the Engagement,
        as
        determined by a responsible and licensed physician, for a continuous period
        of
        60 days or for any 60 days within any 120-day period. In the event of such
        termination during the Initial Term, the Company shall pay to Consultant,
        or
        Consultant’s estate, as the case may be, the Consulting Fee for the remainder of
        the Initial Term plus 60 days. 

      

      (d)    Upon
        termination of this Agreement for any reason, Consultant shall immediately
        return any and all things in his possession or control belonging to the Company,
        including without limitation, computers, files and documents (whether in
        electronic or hard copy format).

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.    Restrictive
        Covenants.

      

      (a)    Consultant
        acknowledges and recognizes that prior to and during the Term he has been
        and
        will be privy to confidential information of the Company. Accordingly, in
        consideration of the promises contained herein and the consideration to be
        received by Consultant hereunder, without the prior written consent of the
        Company, Consultant shall not, at any time during the Term or within 180
        days
        thereafter (x) “engage” (as hereinafter defined) in any Competing Business (as
        hereinafter defined) in the United States, Canada or Europe, or (y) directly
        or
        indirectly (i) induce, solicit or encourage employees of the Company or any
        direct or indirect subsidiary thereof to terminate their employment with
        the
        Company or any such direct or indirect subsidiary, whether or not in connection
        with commencing employment with a Competing Business or (ii) induce or encourage
        any entity or person with which the Company or any direct or indirect subsidiary
        thereof has a business relationship to terminate or alter such business
        relationship. As used herein, “Competing Business” shall mean any person or
        organization that is designing, researching, developing, producing, marketing,
        distributing, leasing, licensing or selling a pharmaceutical that is competitive
        with any product or product candidate that is actively being designed,
        researched, developed, produced, marketed, distributed, leased, licensed
        or sold
        by the Company during the term of this Agreement (a “Conflicting Product”). For
        the avoidance of doubt, Conflicting Products shall include medical devices
        that
        are combination products involving the use of one or more pharmaceuticals
        that
        constitute Conflicting Products, but shall not include medical devices that
        are
        not combination products involving the use of such pharmaceuticals. For purposes
        of this Section 6, “engage” shall mean to serve as an officer, director,
        consultant or employee of or to beneficially own more than 2% of the outstanding
        equity of a Competing Business. It is agreed that a violation of the covenants
        in this Section 6 is not curable for purposes of Section 5(b) of this Agreement.
        

      

      (b)    Consultant
        understands that the foregoing restrictions may limit his ability to earn
        a
        livelihood after the termination of this Agreement in a business similar
        to the
        business of the Company or any subsidiary or affiliate thereof, but he
        nevertheless believes that he has received and will receive sufficient
        consideration provided hereunder to justify clearly such restrictions which,
        in
        any event (given his education, skills and ability), Consultant does not
        believe
        would prevent him from earning a living.

      

      (c)    It
        is
        agreed that the covenant in the foregoing Section 6(a) supersedes the
        restrictive covenant in Section 6 of Consultant’s Invention Agreement. All other
        provisions in the Invention Agreement shall remain in full force and
        effect.

      

      7.    Injunctive
        Relief. 
        It is agreed that the restrictions contained in Section 6 “Restrictive
        Covenants” of this Agreement are reasonable, but it is recognized that damages
        in the event of the breach of any of those restrictions will be difficult
        or
        impossible to ascertain; and, therefore, Consultant agrees that, in addition
        to
        and without limiting any other right or remedy the Company may have, the
        Company
        shall have the right to obtain an injunction against Consultant issued by
        a
        court of competent jurisdiction enjoining any such breach if and to the extent
        that the Company can establish that it has met its burden in demonstrating
        that
        it satisfies the corresponding legal standards for imposing injunctive relief
        under Arizona law. Moreover, nothing in this Agreement shall limit any rights
        or
        remedies otherwise available to the Company or Consultant, including recovering
        damages for any breach of this Agreement. 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.    Part
        of Consideration. 
        Consultant also agrees, acknowledges, covenants, represents and warrants
        that he
        is fully and completely aware that, and further understands that, the
        restrictive covenants contained in Section 6 “Restrictive Covenants” of this
        Agreement and in the Invention Agreement, which are incorporated herein,
        are an
        essential part of the consideration for the Company entering into this Agreement
        and that the Company is entering into this Agreement in full reliance on
        such
        acknowledgments, covenants, representations and warranties.

      

      9.    Nondelegability
        of Consultant’s Rights and Company Assignment Rights. 
        The obligations, rights and benefits of Consultant hereunder are personal
        and
        may not be delegated, assigned or transferred in any manner whatsoever, nor
        are
        such obligations, rights or benefits subject to involuntary alienation,
        assignment or transfer. Upon mutual agreement of the parties, the Company
        upon
        reasonable notice to Consultant may transfer Consultant to an affiliate of
        the
        Company, which affiliate shall assume the obligations of the Company under
        this
        Agreement. This Agreement shall be assigned automatically to any entity merging
        with or acquiring the Company.

      

      10.    Governing
        Law. 
        This Agreement shall be governed by and construed and enforced in accordance
        with the internal laws of the State of Arizona, exclusive of the conflict
        of law
        provisions thereof, and the parties agree that any litigation pertaining
        to this
        Agreement shall be in courts located in Maricopa County, Arizona.

      

      11.    Attorneys’
        Fees. 
        If any party finds it necessary to employ legal counsel or to bring an action
        at
        law or other proceeding against the other party to enforce any of the terms
        hereof, the party prevailing in any such action or other proceeding shall
        be
        paid by the other party its reasonable attorneys’ fees as well as court costs
        all as determined by the court and not a jury; provided, that nothing in
        this
        Section 11 shall be implied as a waiver of either party's right to request
        a
        jury trial.

      

      12.    Notices. 
        All notices and other communications required or permitted to be given under
        this Agreement shall be in writing and shall be considered given and delivered
        when personally delivered to the party to whom such notice or communication
        is
        addressed, or one business day after posting with an overnight courier, or
        when
        confirmation is received if sent by facsimile, or three business days after
        mailing via certified mail through the United States Postal Service, postage
        prepaid, with return receipt requested, properly addressed to a party at
        the
        address set forth below, or at such other address as such party shall have
        specified by notice given in accordance with this Section:

      

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      
        	 	
                If
                  to the Company, to:

              	
                OrthoLogic
                  Corp.

              

      

      1275
        W.
        Washington St.

      Tempe,
        AZ
        85281

      Attn:
        President

      Fax:
        (602) 926-2641

      

      
        	 	
                If
                  to Consultant, to:

              	
                James
                  T. Ryaby, Ph.D.

              

      

      9721
        N.
        118th Way

      Scottsdale,
        AZ 85259

      

      
        	 	
                With
                  fax and email copies to:

              	
                Alan
                  K. Hyde, Esq.

              

      

      Holm,
        Wright, Hyde & Hays PLC

      Fax:
        (480) 961-0818

      Email:
        ahyde@holmwright.com 

      

      13.    Entire
        Agreement. 
        This Agreement and the Invention Agreement constitute the final written
        expressions of the agreement between the parties with regard to Consultant’s
        engagement and are complete and exclusive statements of those terms. They
        supersede all understandings and negotiations concerning the matters specified
        herein and therein. Any representations, promises, warranties or statements
        made
        by either party that differ in any way from the terms of this written Agreement
        or the Invention Agreement shall be given no force or effect. The parties
        specifically represent, each to the other, that there are no additional or
        supplemental agreements between them related in any way to the matters herein
        contained unless specifically included or referred to herein. No addition
        to or
        modification of any provision of this Agreement and the Invention Agreement
        shall be binding upon any party unless made in writing and signed by all
        parties. 

      

      14.    Waiver.
        The
        waiver by either party of the breach of any covenant or provision in this
        Agreement shall not operate or be construed as a waiver of any subsequent
        breach
        by either party.

      

      15.    Invalidity
        of any Provision. 
        The provisions of this Agreement are severable, it being the intention of
        the
        parties hereto that should any provisions hereof be invalid or unenforceable,
        such invalidity or unenforceability of any provision shall not affect the
        remaining provisions hereof, but the same shall remain in full force and
        effect
        as if such invalid or unenforceable provisions were omitted.

      

      16.    Attachments
        Incorporated by Reference. 
        The Invention Agreement and all attachments or exhibits to this Agreement
        are
        incorporated herein by this reference as though fully set forth herein. In
        the
        event of any conflict, contradiction or ambiguity between the terms and
        conditions in this Agreement and any of its attachments, the terms of this
        Agreement shall prevail.

      

      17.    Interpretation
        of Agreement. 
        When a reference is made in this Agreement to an article or section, such
        reference shall be to an article or section of this Agreement unless otherwise
        indicated. The headings contained in this Agreement are for reference purposes
        only and shall not affect in any way the meaning or interpretation of this
        Agreement. Whenever the words “include,” “includes,” or “including” are used in
        this Agreement, they shall be deemed to be followed by the words “without
        limitation.” Headings in this Agreement are for informational purposes only and
        shall not be used to construe the intent of this Agreement. 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      18.    Binding
        Effect; Benefits. 
        This Agreement shall be binding upon and shall inure to the benefit of the
        parties hereto and their respective heirs, successors, executors, administrators
        and assigns. Notwithstanding anything contained in this Agreement to the
        contrary, nothing in this Agreement, expressed or implied, is intended to
        confer
        on any person other than the parties hereto or their respective heirs,
        successors, executors, administrators and assigns any rights, remedies,
        obligations or liabilities under or by reason of this Agreement.

      

      19.    Effect
        of Revocation of Separation Agreement. 
        Notwithstanding anything herein to the contrary, if Consultant revokes the
        Separation Agreement as permitted therein, this Agreement shall be null and
        void, ab
        initio,
        and
        neither party shall have any liabilities or obligations whatsoever
        hereunder.

      

      20.    Counterparts.
        This
        Agreement may be executed simultaneously in any number of counterparts, each
        of
        which shall be deemed an original but all of which together shall constitute
        one
        and the same agreement. 

      

      IN
        WITNESS WHEREOF, Consultant and the Company have executed this Agreement
        as of
        the date first written above.

      

      
        	 Company	
                Consultant

              
	 	 
	 ORTHOLOGIC
                CORP.	 
	 	 	 
	 	 	 
	
                By:

              	
                /s/
                  John M. Holliman

              	
                /s/
                  James T. Ryaby, Ph.D.

              
	 	
                John
                  M. Holliman, III

              	
                James
                  T. Ryaby, Ph.D.

              
	 	
                Executive
                  ChairmanExhibit
                10.1	
                 

              

      

      

      

      

      Ref.
        No.:
        3770502005M100004600

      

      

      

      

      

      

      

      

      Loan
        Contract
(Summary
        Translation)

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      Bank
        of
        Communication

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

       

      

      Ref
        No.:3770502005M100004600

      Loan
        Contract 

      

      
        
          

          
            	Borrower:	 Fuwei Films (Shandong) Co.,
                    Ltd.
	 	 
	Legal Representative:	 Xiaoan He
	 	 
	Legal Address:	 358 Dongfeng Dong Street,
                    Kui
                    District, Weifang
	 	 
	Correspondence Address:	 Same as above
	 	 
	 	 
	Lender:	 Weifang Branch, Bank of
                    Communication
	 	 
	Responsible Person:	 Zengcun Wang
	 	 
	
                    Correspondence
                      Address:

                  	 Dongming Road, Hi-Tech Development
                    Zone, Weifang

          

           

        

      

      Both
        parties agree to the following terms:

       

      
        	
                1

              	
                Loan

              

      

       

      
        	
                1.1

              	
                Currency:
                  Renminbi (RMB)

              

      

       

      
        	
                1.2

              	
                Amount:
                  52,900,000 Only

              

      

       

      
        	
                1.3

              	
                The
                  proceeds of the Loan under this Contract shall be used for industrial
                  working capital.

              

      

       

      
        	
                1.4

              	
                Loan
                  Period: Commencing from December 20, 2005, to December 13,
                  2006.

              

      

      

      
        	
                2

              	
                Interest
                  Rate and Computation of
                  Interest

              

      

       

      
        	
                2.1

              	
                Interest
                  rate: 6.696% (√ annually   
                   monthly).

              

      

       

      
        	
                2.2

              	
                Computation
                  of Interest

              

      

       

      
        	
                2.2.1

              	
                Normal
                  interest = interest rate under this Contract   X  
                  proceeds of the Loan   X   number of days of use.
                  Number of days of use is calculated from the drawing date to the
                  maturity
                  date. 

              

      

      
         

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	
                2.2.2

              	
                The
                  penalty interest of the overdue loan and appropriated loan is calculated
                  based on the amount and the actual number of days overdue or appropriated.
                  If the currency of the loan is Renminbi (RMB), the overdue penalty
                  interest rate is equal to the loan interest rate set forth in this
                  Contract plus 30% of such loan’s interest rate, and the appropriated
                  penalty interest rate is equal to the loan interest rate set forth
                  in this
                  Contract plus 50% of such loan interest rate. If the currency of
                  the loan
                  is a foreign currency, the aforesaid penalty interest rates are
                  equal to
                  the loan interest rate set forth in this Contract plus 20% of such
                  loan
                  interest rate. 

              

      

       

      
        	
                2.3

              	
                The
                  loan under this Contract uses the second (2nd)
                  method mentioned below for payment of interest. On the maturity
                  date, the
                  interest shall be paid together with the principal. The date of
                  payment of
                  interest is the date of the settlement of
                  interest:

              

      

       

      
        	 	
                1.

              	
                Interest
                  settlement on the 20th
                  day of the last month of each quarter;
                  or

              

      

       

      
        	 	
                2.

              	
                Interest
                  settlement on the 20th
                  day of each month.

              

      

       

      
        	
                3

              	
                Granting
                  and Repayment of Loan

              

      

       

      
        	
                3.1

              	
                Borrower
                  shall start the related procedure three (3) business days prior
                  to drawing
                  the proceeds of the Loan in accordance with the following loan
                  drawing
                  schedule: (N/A)

              

      

      

      Drawing
        Date       Drawing
        Amount

      ___
        day
        ___ month ___ Year; ________________________(amount in English)

      ___
        day
        ___ month ___ Year; ________________________(amount in English)

      ___
        day
        ___ month ___ Year; ________________________(amount in English)

      ___
        day
        ___ month ___ Year; ________________________(amount in English)

       

      
         

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	
                3.2

              	
                Unless
                  all of the following conditions are satisfied, Lender has the right
                  to
                  refuse to grant the Loan:

              

      

       

      
        	 	
                1.

              	
                Borrower
                  has already completed the statutory procedures including obtaining
                  related
                  permit, approval and registration from the government and such
                  permit,
                  approval and registration remain in full force and
                  effect.

              

      

       

      
        	 	
                2.

              	
                The
                  guarantee contract (if any) under this Contract has come into effect
                  and
                  remains in full force and effect.

              

      

       

      
        	 	
                3.

              	
                The
                  financial condition of the Borrower does not have any substantial
                  adverse
                  changes; and

              

      

       

      
        	 	
                4.

              	
                Borrower
                  is not in breach of this Contract. 

              

      

       

      
        	
                3.3

              	
                The
                  actual drawing date and drawing amount shall be in accordance with
                  the
                  promissory note.

              

      

       

      
        	
                3.4

              	
                Borrower
                  shall not repay the Loan prior to the scheduled date without having
                  a
                  written consent from Lender.

              

      

       

      
        	
                4

              	
                Representation
                  and Guarantee of the
                  Borrower

              

      

       

      
        	
                4.1

              	
                Borrower
                  is an independent entity and has the necessary contractual capacity
                  to
                  perform this Contract and will be liable for its non-performance
                  of its
                  obligations hereunder.

              

      

       

      
        	
                4.2

              	
                The
                  execution and performance of this Contract is the true intention
                  of the
                  Borrower, and the Borrower has all necessary consents, approvals
                  and
                  authorizations to perform its obligations.

              

      

       

      
        	
                4.3

              	
                All
                  the documents, reports, data and information provided by the Borrower
                  to
                  the Lender during the execution and performance of this Contract
                  are true,
                  accurate, complete and in full effect, and Borrower has not withheld
                  any
                  information which may affect the evaluation of its financial status
                  and
                  repayment ability. 

              

      

       

      
        	5	
                Rights
                  and Obligations of Lender

              

      

      
         

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	
                5.1

              	
                Lender
                  has the right to be repaid the principal, receive interest (including
                  compound, overdue and appropriated penalty interest) and the necessary
                  expenses from the Borrower in accordance with this Contract. Lender
                  has
                  the right to exercise any other rights under the relevant laws
                  and
                  regulations or stipulated in this Contract.

              

      

       

      
        	
                5.2

              	
                Except
                  as otherwise specified under this contract, Lender shall keep all
                  the
                  financial and operation data and information confidential unless
                  compelled
                  by requirements of applicable laws and regulations.
                  

              

      

       

      
        	6	
                Rights
                  and Obligations of
                  Borrower

              

      

       

      
        	
                6.1

              	
                Borrower
                  shall repay the Loan under this Contract and pay the interest hereunder
                  in
                  accordance with the date, amount, currency set forth in this Contract.
                  

              

      

       

      
        	
                6.2

              	
                Borrower
                  shall not use the proceeds of the Loan for any usage not stipulated
                  in
                  this Contract. 

              

      

       

      
        	
                6.3

              	
                Borrower
                  shall be liable for the expenses under this Contract, including
                  but not
                  limited to, expenses for notary service, authentication, evaluation
                  and
                  registration.

              

      

       

      
        	
                6.4

              	
                Borrower
                  shall comply with the operation procedure and the general practice
                  of the
                  Lender and loan application, including but not limited to, facilitating
                  Lender’s examination and supervision on Borrower’s operation status, and
                  providing all the financial statements, or any other data and information
                  requested by Lender, and shall guarantee that such documents, data
                  and
                  information are true, complete and accurate.

              

      

       

      
        	
                6.5

              	
                If
                  any one of the following events occurs, Borrower shall notify the
                  Lender
                  within thirty (30) days and shall not commence such activities
                  unless the
                  Loan and interest under this Contract are repaid completely, or
                  a
                  repayment schedule and guarantee are approved and accepted by the
                  Lender.
                  These are as follows:

              

      

      
         

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	 	
                1.

              	
                Selling,
                  donating, renting, lending, assigning, mortgaging, pledging or
                  disposing
                  of all or substantial part of its
                  assets.

              

      

       

      
        	 	
                2.

              	
                Any
                  substantial changes in organization or structure of the Borrower,
                  including but not limited to, its operation, subcontracting, lease,
                  affiliation, company restructuring, joint-stock, merger (consolidation),
                  equity joint-venture (non-equity), spin-off, incorporation of subsidiary,
                  asset assignment, reduction of registered capital, etc.
                  

              

      

       

      
        	
                6.6

              	
                Borrower
                  shall notify the Lender within seven (7) days of occurrence of
                  any of the
                  following events: 

              

      

       

      
        	 	
                1.

              	
                Amendment
                  of the Articles of Association, change of Borrower’s name, change of legal
                  representative , change of domicile, change of address, and change
                  in the
                  scope of its business.

              

      

       

      
        	 	
                2.

              	
                Borrower
                  or Guarantor’s (if any) intention to file for
                  bankruptcy.

              

      

       

      
        	 	
                3.

              	
                Borrower’s
                  involvement in any major litigation or arbitration, or any lien
                  or
                  encumbrance is imposed on its
                  assets.

              

      

       

      
        	 	
                4.

              	
                Borrower’s
                  guarantee to any other third party, which will have an adverse
                  effect on
                  its financial status and ability to perform its obligations under
                  this
                  Contract.

              

      

       

      
        	 	
                5.

              	
                Borrower
                  enters into a contract which will have a material adverse effect
                  on its
                  operation and financial status. 

              

      

       

      
        	 	
                6.

              	
                Borrower
                  or Guarantor (if any) stops its operation, its business terminates
                  or its
                  business license is revoked.

              

      

       

      
        	 	
                7.

              	
                Borrower’s
                  legal representative or senior management has committed a criminal
                  offence.

              

      

       

      
        	 	
                8.

              	
                Borrower
                  faces substantial hardship in managing its business or any other
                  event
                  which will have an adverse effect on the financial status or ability
                  of
                  the Borrower to repay the Loan.

              

      

      
         

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	
                6.7

              	
                Any
                  changes to the form of collateral under this Contract that may
                  have
                  adverse effect on Lender’s right shall be made upon Lender’s consent.
                  

              

      

       

      
        	7	
                Maturity
                  Repayment of the Loan before the Maturity
                  Date

              

      

       

      
        	
                7.1

              	
                In
                  the event of the occurrence of any of the following events, Lender
                  has the
                  right to suspend the drawing of the proceeds of the Loan and require
                  repayment of the principal of the Loan partially or completely
                  before the
                  maturity date and demand that the Borrower repay the principal
                  of the Loan
                  and pay the interest hereunder. These are as
                  follows:

              

      

       

      
        	 	
                1.

              	
                Borrower’s
                  representations and warranties in Section 4 are not true;
                  

              

      

       

      
        	 	
                2.

              	
                Borrower
                  is in breach of this Contract;

              

      

       

      
        	 	
                3.

              	
                The
                  events set forth in Section 6.6 have occurred and Lender believes
                  that
                  such event will have a material adverse effect on its rights as
                  a
                  creditor; or

              

      

       

      
        	 	
                4.

              	
                Borrower
                  has delayed its performance or is in breach of other contracts
                  entered
                  into between Borrower and Lender, and has not provided the Lender
                  with any
                  remedy upon notification by Lender.

              

      

       

      
        	8	
                Breach
                  of Contract

              

      

       

      
        	
                8.1

              	
                In
                  the event that Borrower fails to repay the principal or interest
                  in full
                  in a timely fashion, or to use the proceeds of the Loan as set
                  forth in
                  this Contract, Lender has the right to use the overdue penalty
                  interest
                  rate and appropriate penalty interest rate to calculate the
                  interest.

              

      

       

      
        	
                8.2

              	
                In
                  the event that Borrower fails to repay the principal or interest
                  in full
                  in a timely fashion, Borrower shall be liable for the Lender’s expenses in
                  exercising its creditor’s rights, including litigation cost (arbitration
                  fee), costs of preservation of asset, costs of publication, enforcement
                  costs, legal fees, travel and other expenses.

              

      

      
         

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	
                8.3

              	
                In
                  the event that Borrower avoids Lender’s supervision, fails to repay the
                  principal or the interest of the Loan or avoids the repayment
                  intentionally, Lender has the right to inform relevant government
                  authority and to publish the payment notification in the news
                  media.

              

      

       

      
        	9	
                Withdrawal
                  Instruction

              

      

       

      
        	9.1	
                In
                  the event that Borrower is overdue in payment in respect of principal,
                  interest, penalty interest, compound interest or other expenses,
                  Lender is
                  authorized to withdraw the money from any other bank accounts of
                  Borrower
                  with Bank of Communication to setoff the said outstanding payment.
                  

              

      

       

      
        	9.2	
                After
                  the aforesaid withdrawal, Lender shall inform the Borrower of such
                  account
                  number, loan contract reference number, promissory note reference
                  number,
                  amount of withdrawal, and the outstanding Loan amount.
                  

              

      

       

      
        	9.3	
                If
                  the amount of withdrawal is not sufficient to setoff the aforesaid
                  payment, the overdue expenses shall be settled first. If the principal
                  and
                  interest are overdue for less than ninety (90) days, the remaining
                  balance
                  shall be first used to settle the overdue interest, penalty interest
                  and
                  compound interest, then shall be used to settle the overdue principal.
                  In
                  the event that the overdue payment or interest is overdue for more
                  than
                  ninety (90) days, the remaining balance shall be used to settle
                  the
                  overdue principal, then shall be used to settle the overdue interest,
                  penalty interest or compound interest.

              

      

       

      
        	9.4	
                If
                  the currency of the aforesaid withdrawal amount is different from
                  the
                  currency of the Loan, the exchange rate determined by Bank of
                  Communication on the date of withdrawal shall be used for the currency
                  conversion calculation. 

              

      

       

      
        	10	
                Dispute
                  Resolution

              

      

       

      
        	
                10.1

              	
                Any
                  dispute arising from or in connection with this Contract shall
                  be resolved
                  by the first method listed below:

              

      

      
         

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

         

         

        
 

      

      
        	 	
                1.

              	
                File
                  a lawsuit to the competent court in the place where Lender is located;
                  or
                  

              

      

       

      
        	 	
                2.

              	
                Submit
                  the disputes to _____________________ arbitration committee for
                  arbitration in accordance with the currently effective arbitration
                  rules
                  of such committee. The arbitral award is final and is legally binding
                  upon
                  both Parties. 

              

      

      

      
        	11	
                Miscellaneous

              

      

       

      
        	
                11.1

              	
                This
                  Contract comes into effect upon both Parties’ execution of this
                  contract.

              

      

       

      
        	
                11.2

              	
                This
                  Contract is executed in three (3) counterparts. Each of the Parties
                  and
                  Guarantor shall keep one counterpart.

              

      

       

      IN
        WITNESS WHEREOF,
        the
        parties hereto have executed this Contract as of the day and year first set
        forth below.

      

      
        
           

          
            	December 20, 2005	 December 20, 2005
	 	 
	Borrower (seal):	 Lender
                    (seal):
	 	 
	 	 
	Legal Representative
                    or Authorized
                    Person	 Responsible Person or
Authorized
                    Person
	 	 
	Xiaoan He	 Bank of
                    Communication
	 	 
	 	 
	(signature or
                    seal)	 (signature or
                    seal)

          

           

        

        
        

        
        

      

      
        
          
          

        

        
          -9-

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