Contract for Joint Venture
Between
Hebei Huaxing Pharmaceuticals Co., Ltd
.
And
Kiwa Bio-Tech Products Group Corporation
Chapter 1 General Rules
According
to “ Law
of the People's Republic of China on Chinese-Foreign Joint
Ventures,” “Company Law of the People’s
Republic of China” and other applicable regulations and
based on principles of equality and mutual benefit, after
discussion, Hebei Huaxing Pharmaceuticals Co., Ltd. and Kiwa
Bio-Tech Products Group Corporation agreed to jointly make
investment to set up a joint venture - Hebei Kiwa Huaxing
Bio-Pharmaceuticals Co., Ltd. in Shijiazhuang City, Hebei
Province, P.R. China. Both parties have made the contract as
follows.
Chapter 2 Parties for Joint Venture
Clause 1. The
parties are as follows:
Hebei Huaxing Pharmaceuticals Co., Ltd ( hereinafter referred to as
“Party A”
) , a company established and existing under laws of P.R. China
with its legal domicile in No. 3 (Fu), Xuefu Road,
Qiaodong
District,
Shijiazhuang
City, Hebei Province.
Legal
representative: Li Ruijun, Chairman of the Board of Directors.
Nationality: Chinese.
Kiwa Bio-Tech Products Group Corporation
(hereinafter
referred to as “Party B”), registered and existing
in DELAWARE
State, U.S.A. with its legal domicile in 415 West Foothill Blvd,
Suite206 Claremont, California, U.S.A.
Legal
representative: Li Wei, Chairman of the Board of Directors.
Nationality: Chinese.
Chapter 3 Establishment of Joint Venture
Clause 2. Both
parties agreed to set up a joint venture (hereinafter referred to
as “the joint venture”) in China in accordance with
“Law of the People's Republic of China on Chinese-Foreign
Joint Ventures” and other applicable
regulations.
Clause 3. Name
of the joint venture: Hebei Kiwa Huaxing Bio-Pharmaceuticals Co.,
Ltd.
Domicile:No.
3 (Fu), Xuefu Road, Qiaodong District, Shijiazhuang City,
Hebei Province, China.
Clause 4. Applicable
Chinese laws, regulations and rules shall be observed for all
activities of the joint venture.
Clause 5. The
joint venture is a liability limited company. Each party shall take
responsibilities for liabilities of the joint venture, share
profits and bear risks and loss in proportion of its ownership to
the joint venture.
Chapter 4 Purpose, Scope and Scale of Production and
Operation
Clause 6. Purposes
of the joint venture: to fully use Party A’s market network
and reserved products, and Party B’s advantages in funds and
technology to develop new animal medicine and expand market shares
so as to gain satisfactory economic benefits for both
parties.
Clause 7. Scope
of operations: (1) Research, develop, produce and marketing of
animal medicine; (2) Technological development, transference and
technical license utilization.
Chapter 5 Total Amount of Investment, Registered Capital and
Investment made by Each Party
Clause 8. Total
amount of investment of the joint venture is USD
2,700,000.
Clause 9. Both
parties shall invest USD 2,110,000 in total, among which USD
1,920,000 as registered capital of the joint venture and the
remaining balance of USD 190,000 as investment premium of Party
B.
Clause 10. Methods
and proportion of investments made by each party:
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(1) |
Party
A shall invest USD 576,000, all of which constitutes its 30% of
registered capital, which means Party A holds 30% ownership of the
joint venture. Party A’s investment to the joint venture is
based on its asset appraisal value RMB 4,200,000 (appraisal
benchmark date: December 31, 2007), certified by the appraisal firm
and confirmed by both parties. The exchange rate (1US dollars = RMB
7.3046) is the trading price on December 31, 2007. The asset
appraisal report is Exhibit A to the contract thereto.
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(2) |
Party
B shall invest USD 1,534,000 in cash, among which USD 1,344,000
constitutes 70% of registered capitals which means Party B holds
70% ownership of the joint venture. The remaining balance of USD
190,000 shall be deemed as premium, recorded as additional paid-in
capital in the joint venture’s book. Such premium is the
consideration of Party A’s existing marketing and sales
network.
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Clause 11. All
legal procedures for the investment to be made by Party A,
including but not limited to transference of the lessee of Party
A’s existing lease agreement of site of operation to the
joint venture, transference of beneficiary of GMP license for
production of animal medicine, all animal medicine manufacturing
license, approval numbers of animal medicine products, of the
beneficiary of registered trademark “Jinxing” to the
joint venture, shall be completed within two months after issuance
of business license to new joint venture by relevant
authority.
Party
B’s investment shall be made in installments: 25% shall
be made within one month after issuance of business license
and another 25% shall be made within two months after issuance
of business license. The remaining shall be made within one
year after issuance of business license.
Clause 12. In
case that any party transfers its part or whole ownership to any
third party, consent of the other party shall be obtained and
approval shall be gained from the authorities. Either party has the
priority to purchase the ownership transferred by the other
party.
Chapter 6 Commitment and Responsibility of both
Parties
Clause 13. Representations
and Warranties of Party A
(
1 )
Party
A has undertaken internal approval procedures for investing
and setting up joint venture under Chinese laws and its
articles of incorporation, including approvals of shareholders
meeting and board of directors.
(
2 )
Party
A promised being in possession of statutory licenses for
production and sales of animal medicine required by Chinese
laws, regulations and policies, including but not limited to
animal medicine manufacturing license, approval numbers of
animal medicine products, some of which are held through its
related parties. Such licenses shall be changed to the joint
venture within two months after establishment of the joint
venture in order to ensure the joint venture to have such
statutory licenses for production and sales of animal medicine
required by Chinese laws, regulations and
policies.
(
3 )
Party
A undertakes authenticity, accuracy and integrality of all
materials such as legal document and financial data provided
during due diligence by Party B and asset appraisal by asset
appraisal firm.
(
4 )
Party
A made the following promises regarding its
investments:
(
i )
It
possesses entire proprietary of the assets, contained in the
assets appraisal report, as its investment to the joint
venture. These assets had not been used as collateral or
pledge against any indebtedness.
(
ii )
Inventory
can be utilized during normal course of business of the joint
venture.
(
iii )
Party
A shall make up in cash the accounts receivables, which has
been invested by Party A but not been settled within one year
after issuance of business license, except those cancelled by
the Board of Directors of the joint venture and treated as
sales commission. The corresponding creditor’s rights
shall be transferred to Party A. The appraisal report has
provided 10% of bad debt provision against Party A’s
account receivables, RMB 148,000, which has not been contained
in Party A’s investment. If the joint venture collect
full amount of accounts receivable in the future, Party B
agrees the joint venture deliver this amount to Party
A.
(
iv )
Guarantee
good conditions and normal operation of production facilities
to be invested to the joint venture.
(
v )
Validity
of lease agreement of land use right of joint venture’s
site of operation to satisfy the normal utilization of
buildings, constructions and underground works during the
period of joint venture set forth in clause 42. In case that
the lessor revokes the lease agreement prior to the due date
and renewal cannot be achieved, for any reason (exclusive of
force majeure set out in Clause 53), Party A shall pay
compensations to joint venture in cash. The compensation shall
be calculated on a pro rata basis, in accordance with the
proportion of unexecuted term of the joint venture period and
total period.
(
vi )
Except
for liabilities presented in the asset appraisal report, no
liabilities and warranty (if any) made by Party A, its
shareholders or relevant parties before establishment of the
joint venture, shall be taken by the joint
venture.
(
vii )
To
ensure funds invested by Party B have been employed in joint
venture’s operation, Party A promises that it has
extended the due date of the liabilities listed in Exhibit B
prior to this agreement. In case creditors of the liabilities
listed in Exhibit B claims settlement prior to the extended
date due to Party A’s failure in obtaining
creditors’ consent of extend, Party A shall be
responsible for the settlement.
(
5 )
Party
A shall made every possible effort to ensure pass Party
A’s existing market system, network, sales team to the
joint venture; during the period of joint venture, except for
services for the joint venture, Party A, its shareholders or
related parties shall not conduct businesses same as or
identical to the joint venture in any way so as to avoid
horizontal competition.
(
6 )
Party
A promised to operate its business and manage its assets as
investment bona fade before establishment of the joint venture
to avoid the assets from being devalued; in case of devalue,
Party A shall make it up in cash; profit generated from the
operation during the benchmark date of asset appraisal date
and the date of joint venture’s establishment shall
belong to Party A. Further, Party A shall keep complete
accounting records from the benchmark date of asset appraisal
(December 31, 2007) to the date of the joint venture
establishment. When establishing, the assets invested,
together with accounting records shall be delivered to the
joint venture.
(
7 )
Party
A shall provide assistance to go through procedures with
relevant authorities, such as application for approval,
registration and etc.
(
8 )
Party
A shall be responsible for any other issues entrusted by the
joint venture.
Clause 14. Representations
and Warranties of Party B
(
1 )
Party
B has undertaken internal approval procedures for investing
and setting up joint venture under laws and its articles of
incorporation, including approval of the board of
directors.
(
2 )
Party
B shall make the investment on schedule in accordance with the
provisions set forth in Clauses 10 and 11.
(
3 )
After
establishment of the joint venture, Party B agreed to apply
for “Registration Certificate of New Animal
Medicine” and “Approval Number of Animal Medicine
Product” for its AF-01 anti-viral aerosol technology
under the name of the joint venture. Therefore, necessary
arrangement for experiment, construction and certification of
production facilities shall be contained in the plan of the
joint venture’s new product development and operation
plan. Payment for technical license fee may be made as
compensations for Party B’s AF-01 anti-viral aerosol
technology. Both parties shall enter into other agreement(s)
for license application matters and distribution of
profit.
(
4 )
Party
B shall be responsible for handling other issues entrusted by
the joint venture.
Chapter 7 Board of Directors
Clause 15. The
joint venture shall set up Board of Directors on the date when
relevant authorities issues business license to the joint
venture.
Clause 16. The
Board of Directors shall be made up of five directors, among which
two Directors shall be appointed by Party A and the remaining three
directors shall be appointed by Party B. The Chairman of the Board
of Directors (“Chairman”) shall be appointed by Party
B; and the Vice Chairman of the Board of Directors (“Vice
Chairman”) shall be appointed by Party A. Term of members of
the Board, the Chairman and Vice Chairman shall be four years,
which can be extended subject to the appointment of the
party.
Clause 17. The
Board of Directors is the paramount of the joint venture. Scope of
authorities of the Board of Directors shall be as
follows:
(
1 )
To
ratify annual business plan, annual budget and report of
operations;
(
2 )
To
ratify annual financial report and plan of profit
distribution;
(
3 )
To
approve bylaws of the joint vent
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