<PAGE>
EXHIBIT 10.4
[EXECUTION VERSION]
SHARE TRANSFER AND DEBT RESTRUCTURING AGREEMENT
RELATING TO
BEIJING WANWEI PHARMACEUTICAL CO. LTD.
BETWEEN
BEIJING WANHUI PHARMACEUTICAL GROUP
AND
BEIJING MED-PHARM CORPORATION
DATED DECEMBER 15, 2004
<PAGE>
CONTENT
<TABLE>
<CAPTION>
CLAUSE
PAGE
------
----
<S>
<C>
RECITALS...................................................................................................
1
ARTICLE 1 SHARE
TRANSFER..................................................................................
2
ARTICLE 2 DEBT RESTRUCTUING AND
CONSIDERATRION FOR THE SHARE
TRANSFER..................................... 4
ARTICLE 3 ARRANGEMENTS DURING TRANSITION
PERIOD...........................................................
8
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND
UNDETAKINGS.....................................................
8
ARTICLE 5 EFFECTIVENESS AND
TERMINATION...................................................................
11
ARTICLE 6 FORCE
MAJEURE...................................................................................
12
ARTICLE 7 BREACH OF
CONTRACT..............................................................................
12
ARTICLE 8 DISPUTE
RESOLUTION..............................................................................
13
ARTICLE 9 GOVERNING
LAW...................................................................................
14
ARTICLE 10
NOTICES.........................................................................................
14
ARTICLE 11 MISCELLANEOUS
PROVISIONS........................................................................
14
SIGNATURE
PAGE.............................................................................................
16
SCHEDULE
1.................................................................................................
18
SCHEDULE
2.................................................................................................
22
SCHEDULE
3A................................................................................................
23
SCHEDULE
3B................................................................................................
24
SCHEDULE
3C................................................................................................
25
SCHEDULE
3D................................................................................................
26
SCHEDULE
4.................................................................................................
28
SCHEDULE
5.................................................................................................
38
SCHEDULE
6.................................................................................................
39
SCHEDULE
7.................................................................................................
44
SCHEDULE
8.................................................................................................
51
</TABLE>
<PAGE>
SHARE TRANSFER AND DEBT RESTRUCTURING AGREEMENT
This Share Transfer and Debt Restructuring
Agreement (this "AGREEMENT") is made
in Beijing on December 15, 2004 by and
between:
(1) BEIJING WANHUI
PHARMACEUTICAL GROUP ("WANHUI GROUP"), a wholly state owned
enterprise
organized and existing under the laws of the People's Republic
of China
(the "PRC"), with its domicile at No. 129, Xuanwumen Xi Da Jie,
Xicheng
District, Beijing, legal representative being Zhaoyi Wang;
(2) BEIJING MED-PHARM COPORATION
("BMP"), a corporation organized under the
laws of
the State of Delaware, the United States, with its domicile at
1180 Main
Street, Coventry, CT 06238, legal representative being Xiaoying
Gao
(Title: Chief Executive Officer and President; Nationality:
USA).
Wanhui Group and BMP hereinafter
individually referred to as a "PARTY" and
collectively referred to as the
"PARTIES".
RECITALS
(1) WHEREAS, Beijing Wanwei
Pharmaceutical Co., Ltd. (the "COMPANY") is a
limited
liability company established under the laws of the PRC, with
its
registered
capital being RMB5,880,000.00 yuan. Wanhui Group holds 80% of
its equity
interests, and Wen Xinholds the remaining 20%;
(2) WHEREAS, meanwhile Wanhui
Group is a creditor of the Company. Since the
Company is
not able to discharge its indebtedness due and payable to
Wanhui
Group, Wanhui Group wishes to restructure the debt of the
Company
pursuant
to the terms and conditions of this Agreement with the
participation of BMP and to transfer its equity interests in the
Company
to
BMP;
(3) WHEREAS, BMP agrees to
acquire Wanhui Group's equity interests in the
Company
and to participate in the debt restructuring of the Company as
per
the terms
and conditions of this Agreement;
(4) WHEREAS, BMP has entered
into a Share Transfer Agreement with Wen Xin, the
other
shareholder of the Company, on the date hereof to acquire [name
of
the other
shareholder of the Company]'s equity interests in the Company;
(5) WHEREAS, Wanhui Group and
Wen Xin agree to increase the registered capital
of the
Company from the current RMB5,880,000.00 yuan to US$ 1,750,000,
and
the amount
of increased capital US$1,039,000 shall be fully subscribed by
BMP;
- 1 -
<PAGE>
(6) WHEREAS, both Parties
acknowledge that the contemplated share transfer,
capital
increase and the debt restructuring of the Company shall be
completed
in compliance with the requirements of the relevant laws and
regulations of the PRC and the provisions of the Articles of
Association
of the
Company;
(7) WHEREAS, the Company has
reported to the employees' representative meeting
in respect
of the restructuring of the Company with the participation of
foreign
investment. And Beijing Pharmaceutical Group Co., Ltd., its
state-owned assets administration entity, has agreed with the
contemplated
debt
restructuring and share transfer hereunder.
NOW, THEREFORE Wanhui Group and BMP
hereby agree as follows:
ARTICLE 1 SHARE TRANSFER
1.1 Wanhui Group agrees to
transfer to BMP and BMP agrees to acquire from
Wanhui
Group the 80% equity interest (the "TRANSFERRED SHARES") held
by
Wanhui
Group in the Company on the terms and conditions of this
Agreement.
Wanhui
Group agrees that BMP shall fully subscribe the amount of the
increased
capital of the Company (the "AMOUNT OF INCREASED CAPITAL"),
i.e.US$1,039,000. BMP shall contribute such Amount of Increased
Capital to
the
Company in accordance with the provisions of the revised and
restated
Articles
of Association of the Company.
1.2 Both Parties agree that from
the date when all of the following conditions
precedent
have been satisfied (the "DATE OF TRANSFER"), BMP shall be the
owner of
the Transferred Shares and become the shareholder of the
Company:
(1)
For the purpose
of the transactions hereunder, Wanhui Group has been
provided by Yue Hua Certified Accounting Firm with the Asset
Evaluation Report (summary attached hereto as Schedule 1) with
the
base date being April 30, 2004 (the "BASE DATE"). And such
report
has
been filed with Beijing State-owned Assets Administration
Bureau
or its authorized entity, Beijing Pharmaceutical Group Co.,
Ltd.;
(2)
Beijing
State-owned Assets Administration Bureau or its authorized
entity, Beijing Pharmaceutical Group Co., Ltd., has approved
the
terms and conditions of the debt restructuring and share
transfer
provided in this Agreement;
(3)
Wanhui Group has
listed the Transferred Shares at Beijing Equity
Exchange and BMP has become the transferee of the Transferred
Shares;
(4)
The share
transfer contemplated under this Agreement, the share
transfer
- 2 -
<PAGE>
contemplated under the Share Transfer Agreement between BMP and
[name of the other shareholder of the Company], and the revised
Articles of Association of the Company have been approved by
the
Ministry of Commerce or its authorized authority (the
"EXAMINATION
AND APPROVAL AUTHORITY") and the Company has been issued with
an
Approval Certificate of Foreign Investment Enterprise;
(5)
Beijing Drug
Administration Bureau has renewed the Pharmaceutical
Distribution License of the Company for an additional five years
and
has approved the change of legal representative and other issues
(if
any) thereon;
(6)
The amendment
registration in respect of the share transfer
contemplated hereunder, the share transfer contemplated under
the
Share Transfer Agreement between BMP and Wen Xin, and the
revised
Articles of Association of the Company has been effected with
Beijing Administration for Industry and Commerce (the
"REGISTRATION
AUTHORITY"); and
(7)
There shall have
been no material adverse change in the financial
condition, operations or business prospects of the Company
during
the Transition Period, as such terms are defined in Article
3.1,
with the exception of any such material adverse change
resulting
from an action or inaction taken by the Company with the approval
of
the Supervision Committee as such terms are defined in Article
3.1.
Upon the
completion of the share transfer hereunder and the share
transfer
as
contemplated under the share transfer agreement between BMP and
[name
of the
other shareholder of the Company], BMP shall become the sole
shareholder of the Company, and the Company shall be converted into
a
wholly
foreign owned enterprise pursuant to the PRC law.
1.3 Wanhui Group confirms that,
prior to the execution of this Agreement, the
shareholders' meeting of the Company has adopted a valid
resolution
approving
the transfer of the Transferred Shares to BMP from Wanhui
Group,
the
subscription by BMP of the Amount of Increased Capital and the
corresponding amendments to the Articles of Association of the
Company.
1.4 Wanhui Group confirms that
Wen Xin has waived its right of first refusal
with
respect to the Transferred Shares prior to the execution of
this
Agreement,
and its consent letter is attached hereto as Schedule 2.
1.5 No later than three (3)
months after the date hereof, both parties shall
cause the
Company to submit this Agreement, the revised Articles of
Association of the Company and an original copy of the duly
signed
resolution
referred to in Article 1.3 above together with other necessary
application documents to the Examination and Approval
Authority.
1.6 Both Parties shall take
their best endeavour to obtain the approval from
the
Examination and Approval Authority, to assist the Company in
going
through
the amendment registration
- 3 -
<PAGE>
formalities with the Registration Authority and to obtain other
government
approval,
verification or registration which are required for the purpose
to
implement the share transfer and debt restructuring hereunder.
ARTICLE 2
DEBT RESTRUCTUING AND CONSIDERATRION FOR THE SHARE TRANSFER
2.1 Debts to be restructured
Wanhui
Group hereby represents and confirms that the following credit
rights and
debt between the Company and itself shall be restructured in
accordance
with the terms and conditions of this Agreement:
(1)
RMB50,160,000.00
yuan owing to Wanhui Group by the Company as of the
Base Date, including the principal and interests accrued
thereon,
the breakdown of which has been confirmed by Wanhui Group and
the
Company in writing and attached hereto as Schedule 3 (A);
Wanhui
Group confirms that such amount has contained all amounts owing
to
it by the Company as of the Base Date, excluding those incurred as
a
result of the normal business transactions with the Company;
(2)
RMB12,820,000.00
yuan owing to the Company by Wanhui Group as of the
Base Date (no interest was charged thereon), which does not
include
any debt incurred in its normal course of business with Wanhui
Group, and the breakdown of which has been confirmed by Wanhui
Group
and the Company in writing and attached hereto as Schedule 3
(B);
(3)
RMB7,000,000.00
yuan owing to Wanhui Group by the Company incurred
after the Base Date, excluding any accrued interest thereon,
the
breakdown of which has been confirmed by Wanhui Group and the
Company in writing and attached hereto as Schedule 3 (C);
Wanhui
Group confirms that such amount has contained all amounts owing
to
it by the Company from the Base Date till the date hereof,
excluding
those incurred as a result of the normal business transactions
with
the Company.
2.2 Debt Restructuring and the
Payment of Considerations for Share Transfer
As
conditions to the share transfer hereunder, both Parties agree to
have
the credit
rights and debts between Wanhui Group and the Company provided
in Article
2.1 restructured as follows:
2.2.1 Set-off of the credit rights and
indebtedness
As the
pre-condition for BMP to acquire the Transferred Shares from
Wanhui
Group and
perform its obligations provided in Articles 2.2.2 and 2.2.3
herebelow,
Wanhui Group
- 4 -
<PAGE>
agrees
that:
(1)
No interests
shall be accrued on the amount owing to Wanhui Group by
the Company as set forth in Article 2.1(1) from the Base Date;
(2)
The amount owing
to Wanhui Group by the Company under Article 2.1(1)
shall be set off against the amount owing to the Company by
Wanhui
Group under Article 2.1(2) on the date hereof. The confirmation
letter issued by Wanhui Group and the Company with respect to
their
mutual acknowledgement to such set-off is attached hereto as
Schedule 3(D).
After the
set-off mentioned above, the net amount owing to Wanhui Group
by
the
Company which shall be restructured in accordance with the
provisions
herebelow
shall be RMB 44,340,000.00 yuan or other amount as adjusted as
per
Article 2.4 hereof.
2.2.2 Debt to be paid by BMP on behalf of
the Company
As one of
the considerations for transferring the Transferred Shares by
Wanhui
Group to BMP, BMP agrees to pay Wanhui Group as per this
Article
2.2.2.
(1)
With respect to
the net debt owing to Wanhui Group by the Company as
provided in Article 2.2.1(2), BMP agrees to pay RMB 8 million
yuan
or other amount as adjusted as per Article 2.4 herein (the "DEBT
TO
BE PAID BY BMP") in accordance with the terms and conditions
hereunder;
(2)
Within ten (10)
working days from the date hereof, BMP shall
pay,through the Company,Wanhui Group 30% of the Debt to be Paid
by
BMP as down payment ("DOWN PAYMENT").
Should this Agreement be terminated due to Wanhui Group, Wanhui
Group shall return BMP the Down Payment plus the interest
thereon
calculated at prevailing deposit interest rate with the same
tenure
within five (5) working days upon the receipt of payment notice
from
BMP.
Should this Agreement be terminated due to BMP, Wanhui Group
will
not return the Down Payment.
Should this Agreement be terminated due to reasons neither
attributable to Wanhui Group nor BMP, Wanhui Group shall return
BMP
the Down Payment plus the interest thereon calculated at
prevailing
deposit interest rate with the same tenure within five (5)
working
days upon the receipt of payment notice from BMP.
(3)
Subject to the
satisfaction of the following conditions, BMP shall,
through the Company, pay Wanhui Group the rest of the Debt to
be
Paid by BMP within thirty
- 5 -
<PAGE>
(30) working days after the Date of Transfer:
(a) All the
Schedules hereof have been executed pursuant to the
provided form and have become effective; and
(b) Wanhui Group
has not violated any of its representations,
warranties and undertaking made hereunder.
Except otherwise mutually agreed in writing, BMP shall be
entitled
to terminate this Agreement if the above conditions fail to be
satisfied within three (3) months after the Date of Transfer.
(4)
BMP shall make
payment in accordance with this Article 2.2.2 in
equivalent
US dollars amount calculated at the average rate between
US dollars and RMB promulgated by the People's Bank of China on
the
date of payment. Wanhui Group shall notify BMP in writing of
its
bank account to receive such payments and the payment itinerary
in
advance.
2.2.3 Debt to be paid via loan arranged by
BMP
In
addition to Article 2.2.2, as the other consideration for
transferring
the
Transferred Shares by Wanhui Group to BMP, BMP agrees to
arrange
entrusted
loan to the Company as per this Article 2.2.3 in order to
enable
the
Company to repay Wanhui Group in accordance with the following
provisions.
(1)
With respect to
the net debt owing to Wanhui Group by the Company as
provided in Article 2.2.1(2), BMP agrees to arrange a lender to
provide entrusted loan to the Company in order to enable the
Company
to repay RMB7 million yuan (the "DEBT PAID VIA ARRANGEMENT BY
BMP")
to Wanhui Group;
(2)
The Company, the
lender arranged by BMP and CITIC Industrial Bank
shall enter into an entrusted loan contract substantially
complying
with Schedule 4 hereof on the date hereof. The facility amount
shall
be applied to repay Wanhui Group the amount owing to Wanhui
Group
set forth in Clause 2.2.3(1) within five (5) working days as of
the
date hereof;
(3)
Should this
Agreement be terminated due to Wanhui Group, and the
Company fail to repay the lender arranged by BMP the principal
and
interest due plus all reasonable expenses incurred by the
lender
arranged by BMP with regard to such entrusted loan, including
but
not limited to the commission fees thereon (if any), Wanhui
Group
agrees that, as the guarantor of the Company, it shall pay the
lender arranged by BMP any amount payable by the Company on
behalf
of the Company within five (5) working days after the receipt of
the
notice of repayment from CITIC Industrial Bank.
- 6 -
<PAGE>
Should this Agreement be terminated due to BMP, the Company
shall
not be obligated to repay the lender arranged by BMP the
interest
due and payable. The Company shall repay the lender arranged by
BMP
the principal within two (2) working days after CITIC
Industrial
Bank issues notice of repayment. If the Company fails to repay
the
principal, Wanhui Group agrees that, as the guarantor of the
Company, it shall pay such principal to the lender arranged by
BMP
on behalf of the Company within five (5) working days after the
receipt of the notice of repayment from CITIC Industrial Bank.
Should this Agreement be terminated due to reasons neither
attributable to Wanhui Group nor BMP, and the Company fail to
repay
the lender arranged by
BMP the principal and interest due plus all
reasonable expenses incurred by the lender arranged by BMP with
regard to such entrusted loan, including but not limited to the
commission fees thereon (if any), Wanhui Group agrees that, as
the
guarantor of the Company, it shall pay the lender arranged by
BMP
any amount payable by the Company on behalf of the Company
within
five (5) working days after the receipt of the notice of
repayment
from CITIC Industrial Bank.
2.2.4 Debt to be forgiven
As a
pre-condition to BMP's acquisition of the Transferred Shares
from
Wanhui
Group and BMP's performance of its obligations provided in the
above-mentioned Articles 2.2.2 and 2.2.3, Wanhui Group agrees that,
as of
the date
hereof, except for the Debt to be Paid by BMP and Debt Paid via
Arrangement by BMP, the Company shall be exempted from paying the
rest of
the net
debt provided in Article 2.2.1(2), including the principal and
accrued
interests, totalling RMB29,340,000.00 yuan or other amount as
adjusted
as per Article 2.4 herein (the "FORGIVEN DEBT").
2.3 In consideration that BMP
performs its obligations under Articles 2.2.2
and 2.2.3
herein, Wanhui Group agrees and confirms that BMP shall not be
obligated
to pay any additional amount with respect to the Transferred
Shares.
2.4 Both Parties confirm that
the credit and debt amount provided in Articles
2.1(1) and
2.1(2) are based on the Asset Evaluation Report issued by Yue
Hua
Certified Accounting Firm.
Both
Parties agree that the amounts of the Debt to be Paid by BMP
and/or
the
Forgiven Debt shall be adjusted accordingly should substantial
mistakes
be found in the said evaluation report or the net assets of the
Company
changes substantially during the period from the Base Date to
the
date
hereof. Where the net assets of the Company changes beyond RMB
200,000.00 yuan as confirmed by a
PRC certified public accountants
mutually
recognized by both parties in accordance with PRC accounting
system,
the amounts of the Debt to be Paid by BMP shall be increased or
decreased
by such amount. However, any change to the net assets arising
from the
debt restructuring shall not be calculated for such
- 7 -
<PAGE>
purpose.
Both
parties agree that if the Company need pay any tax due to the
debt
restructuring, the Debt to be Paid by BMP shall be reduced
accordingly by
such
amount.
ARTICLE 3 ARRANGEMENTS DURING TRANSITION PERIOD
3.1 Both Parties shall take all
necessary measures to ensure the proper
operation
and smooth transition of the Company between the date hereof
and
the Date
of Transfer ("TRANSITION PERIOD"). Both parties agree that BMP,
Wanhui
Group and [the other shareholder] shall appoints respective
delegates
to establish a supervision committee. Such committee shall be
composed
of seven members, with BMP appointing three, Wanhui Group
appointing
three, the other shareholder appointing one. The chairman of
the
supervision committee shall be from the delegates appointed by
BMP.
Any major
decisions shall not be concluded unless approved by half
(inclusive) of all the members of the supervision committee. No
major
business
decision of the Company shall be made without prior consent of
such
supervision committee.
3.2 During the Transition
Period, Wanhui Group shall not enter into agreement
or
document related to the Transferred Shares with any third
party,
including
but not limited to the transfer of the Transferred Shares in
whatever
means, pledge or any kinds of disposal of the Transferred
Shares.
3.3 Wanhui Group agrees that the
Company will not make dividend distribution,
in
whatever manner, during the Transition Period. BMP shall be
entitled to
delegate
its financial personnel to supervise the financial operation of
the
Company.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDETAKINGS
4.1 Each Party represents and
warrants to the other Party that, on the date
hereof,
the Date of Transfer and each payment date:
(1)
It has full
power and authorization to execute and perform this
Agreement and its Schedules;
(2)
This Agreement
shall be legally binding on such Party as of the
Effective Date; the execution and performance of this Agreement
and
its Schedules to which it is a party does not violate its
Articles
of Association or the provisions of any contracts, agreements
or
other legal documents to which it is a party; and
(3)
No lawsuit,
arbitration or other legal or governmental proceeding is
pending or threatened against it that would affect its ability
to
perform its obligations under this
- 8 -
<PAGE>
Agreement.
4.2 Wanhui Group hereby
represents and warrants to BMP that, on the date
hereof,
the Date of Transfer and each payment date:
(1)
The Company is
legally incorporated and duly existing under PRC law,
having all powers and government authorization, permit, consent
and
approval which are required for it to carry out its current
business, which will not be terminated or prejudiced or may be
terminated due to the transactions hereunder;
(2)
Wanhui Group is
the sole legal owner of the Transferred Shares. The
Transferred Shares shall be free of any security interest or
any
third party dispute;
(3)
Except expressly
provided in this Agreement and its Schedules, the
execution and performance of this Agreement and each Schedule
to
which it is a party shall not be subject to any government
approval,
verification or filling requirement, nor requiring any consent,
permit or approval of any third party;
(4)
Except for the
interest accrued under the loan provided under
Schedule 3C, the aggregate principal amount and accrued
interest
owed by the Company to Wanhui Group or any of its affiliates is
RMB
57,160,000.00 yuan and after BMP and/or the Company pays an
aggregate RMB 15,000,000.00 yuan or other amount adjusted as
per
Article 2.4 herein to Wanhui Group in accordance with the terms
of
this Agreement, neither BMP nor the Company shall have any
further
monetary obligations to Wanhui Group or any of its affiliates.
"Affiliate" in the Agreement means "(i) any entity that, directly
or
indirectly through one or more intermediaries, controls Wanhui
Group
or is controlled by Wanhui Group or controlled by the same one
or
more intermediaries as Wanhui Group does and (ii) any entity in
which Wanhui Group has an equity interest greater than
10% (inclusive).
(5)
Except as set
forth on Schedule 5, the Company does not owe any
principal amount and/or accrued interest to any third party
other
than those arising from normal business transaction.
(6)
The number of
the existing employees of the Company is eighty-two
(82), among which, five (5) are engaged as per respective
service
agreement. The Company has entered into labor contracts with
the
rest seventy-seven (77) employees. Except for salary, social
insurance, economic compensation (if any) and service fee which
are
stipulated in relevant labour contracts, service agreement and
disclosed in Schedule 6, the Company has no monetary obligations
to
current employees.
(7)
There are no
pending or threatened labour disputes between the
Company and its existing employees and those who used to be
employed
by the Company. And there exist no situations which may give rise
to
labour disputes. The Company has no
- 9 -
<PAGE>
monetary obligations to any former employees of the Company
which
have been terminated and such employees have no legal right
which
would require the Company to rehire such former employees.
(8)
Materials
provided to BMP by Wanhui Group directly or via the
Company (list of which is attached hereto as Schedule 6) are
true,
accurate and complete. Such materials truly and fairly reflect
the
whole assets, actual and contingent liabilities including all
provisions, tax and social welfare, financial situation of the
Company on relevant date and operation results of relevant
periods.
Such materials have accurately reflected and disclosed all
particular items. There exist no other rights or liabilities,
actual
or contingent, except for those which have been disclosed in
this
Agreement including the Schedules hereto;
(9)
There exists no
pending or threatened lawsuit, arbitration, and
government proceedings against the Company. And there have not
incurred any events prior to the date hereof which may give rise
to
any such lawsuit, arbitration or government proceedings;
(10)
The Company shall
maintain stability of its current management and
key employees;
(11)
The Company has been
operating lawfully since its incorporation and
there has been no material violation of law; and
(12)
It is the legal owner
of the offices and warehouse which the Company
is using
for the time being. It has the full right to lease such
properties to the Company in accordance with the document set
forth
in Schedule 7 and Schedule 8. It will be responsible for
obtaining
all required approvals and going through all relevant
registration
formalities and bearing relevant fees arising therefrom on its
own
cost to make the lease provided in such Schedules legal and
valid.
Should Schedules 8 cannot be performed, in part or in whole,
for
reason not caused by the Company, Wanhui Group shall find the
Company other premises which will be identically furnished as
the
current warehouse on same or better terms and conditions.
Should it fail to find such substitute, it shall be obligated
to
compensate all costs and expenses the Company sustains in
finding
such a substitute.
(13)
The person who execute
this Agreement for and on behalf of Wanhui
Group shall be the legal representative of Wanhui Group or
his/her
authorized representative, and has right to execute this
Agreement
on behalf of Wanhui Group
4.3 BMP hereby represents and
warrants to Wanhui Group that:
- 10 -
<PAGE>
(1)
BMP is legally
incorporated and duly existing under the law of
Delaware, having all powers and government authorization,
permit,
consent and approval which are required for it to carry out its
current business, which will not be terminated or prejudiced or
may
be terminated due to the transactions hereunder;
(2)
BMP shall
provide all documents required for going through the share
transfer, and guarantee the truthfulness and legality of such
documents.
(3)
After the Date
of Transfer, it will cause the Company to select the
qualified ones from existing key managerial and technical
personnel
and engage them to proper positions to ensure the continuity
and
stability of the management and operation team of the Company;
(4)
It will cause
the Company to allocate the existing employees
properly in accordance with the labour laws and regulations and
relevant employment contracts; However, it will cause the Company
to
renew the employment contracts with those employees, the tenure
of
whose employment contracts is less than one year as of the Date
of
Transfer;
(5)
It shall
increase the registered capital of the Company to US$
1,750,000 as per the revised Articles of Association of the
Company;
and
(6)
It shall pay the
Debt to be Paid by BMP and arrange the entrusted
loan in accordance with the terms and conditions of this
Agreement;
and
(7)
The person who
executes this Agreement for and on behalf of BMP
shall be the legal representative of BMP or his/her authorized
representative, and has right to execute this Agreement on behalf
of
BMP.
4.4 Both Parties confirm that
the execution and performance of this Agreement
by any
Party is in reliance on the above representations and
warranties.
Should any
Party find any change with respect to the above prior to the
Date of
Transfer or any payment date, it shall promptly inform the
other
Party in
writing. Except otherwise provided herein, both Parties shall
negotiate
to find solution.
ARTICLE 5 EFFECTIVENESS AND TERMINATION
5.1 Effectiveness
This
Agreement shall be formed upon the signing by the legal
representatives or the authorized representatives of the Parties
and/or
being
affixed with their official chops, and the part related to the
share
transfer
will become effective from the date when approved by
- 11 -
<PAGE>
the
Examination and Approval Authority.
5.2 Termination
This
Agreement may be terminated if any of the following situations
occurs:
(1)
If the transfer
of the Transferred Shares to BMP has not been
submitted to the Examination and Approval Authority, or the
application has been rejected within three (3) months after the
date
hereof; or if the application has not been approved by the
Examination and Approval Authority, or any of the other
conditions
precedent listed in Article 1.2 has not been met within six (6)
months after the application has been submitted, either party
has
the right to terminate the Agreement upon written notice to the
other party but that it will take the consent of both parties
to
extend either of the above periods;
(2)
Wanhui Group may
terminate this Agreement should BMP delay the
payment of the Debt to be Paid by BMP for a period of more than
thirty (30) days;
(3)
Should either
Party breach its representation, warranties and
undertakings herein and fail to cure such breach within thirty
(30)
days after the notification by the other Party, the
non-breaching
Party shall be entitled to terminate this Agreement; or
(4)
Other situations
expressly provided herein or agreed by the Parties
5.3 Should the Agreement be
terminated pursuant to Article 5.2, Wanhui Group
shall
return to BMP any amount BMP has paid within five (5) working
days
from the
termination date, including the interest calculated at the
prevailing
deposit interest rate with the same tenure.
ARTICLE 6 FORCE MAJEURE
Neither party shall be held liable in the
event this Agreement is suspended, in
part or in whole, due to force majeure. The
party such affected shall notify the
other party in writing within seventy-two
(72) hours as of the happening of the
force majeure event, and provide the other
party relevant evidencing documents
issued by related government departments
within seven (7) days as of the
happening of the force majeure event. Where
the force majeure event has lasted
for ninety (90) days, both parties shall
negotiate on the performance of this
Agreement, including whether to terminate
this Agreement. For the purpose of
this Agreement, any significant adverse
change to the business financial and/or
operation of the Company between the date
hereof and the Date of Transfer caused
or to be caused by change of law shall be
recognized as one type of force
majeure.
ARTICLE 7 BREACH OF CONTRACT
Subject to other provisions of this
Agreement, one Party shall be deemed to have
violated this
- 12 -
<PAGE>
Agreement if it fails to fulfill any
obligations under this Agreement, or any of
its representations and/or warranties under
this Agreement is proved to be
untrue or materially incorrect. The
breaching Party shall correct its violation
at its own cost within the period required
by the other Party in the breaching
notice, in no event more than thirty (30)
days since it receives such notice
from the other Party. Except for the other
remedies provided in this Agreement,
should the violation have not been
corrected after the period requested in the
breaching notice or thirty (30) days, the
non-breaching Party shall have the
right to terminate this Agreement and the
Party at default shall compensate the
other Party all economic losses incurred
from or suffered due to such violation.
The losses will include but not limited to
all costs arising from the execution
of this Agreement and the arbitration cost,
legal fee, identification fee,
travelling allowances and communication fee
related to requiring the party at
default for performance and claiming for
liquidated damages.
ARTICLE 8 DISPUTE RESOLUTION
8.1 Friendly Consultations
In the
event of any dispute, controversy or claim (collectively,
"DISPUTE")
arising out of or relating to this Agreement, the Parties shall
attempt in
the first instance to resolve such Dispute through friendly
consultations.
8.2 Arbitration
(1)
If the Dispute
is not resolved by friendly consultations within
thirty (30) days after the commencement of such friendly
consultations, then at any time either party may submit the
Dispute
to Hong Kong International Arbitration Center (the "HKIAC") in
accordance with the United Nations Commission on International
Trade
Law Arbitration Rules (the "UNCITRAL") presently in force,
which
rules are deemed to be incorporated by reference into this
clause.
(2)
The place of
arbitration shall be Hong Kong and the arbitration
shall be conducted in English.
(3)
The arbitration
award shall be final and binding on both Parties,
and both parties agree to be bound thereby and to act
accordingly.
(4)
The costs of arbitration shall be
borne by the Party or Parties as
designated in the arbitration award.
8.3 Continuing Rights and
Obligations
When any
Dispute occurs and is the subject of friendly consultations,
joint
conciliation or arbitration, the Parties shall continue to
exercise
their
remaining respective rights, and fulfil their remaining
respective
obligations, under this Agreement, except in respect of those
matters
under
Dispute.
- 13 -
<PAGE>
ARTICLE 9 GOVERNING LAW
The validity, interpretation and
implementation of this Agreement and dispute
resolution shall be governed by the laws of
the PRC which are published and
publicly available.
ARTICLE 10 NOTICES
Any notice or written communication in
connection with this Agreement by any
Party to the other shall be made in both
Chinese and English by courier service
or by facsimile. The date of receipt of a
notice or communication hereunder
shall be deemed to be seven (7) working
days after the letter is given to the
courier service in the case of a courier
service delivered letter and two (2)
working days after successful dispatch in
the case of a facsimile. All notices
and communications shall be sent to the
address set forth below, until the same
is changed by notice given in writing to
the other Party:
WANHUI GROUP:
No. 129, Xuanwumen Xi Da Jie, Xicheng District, Beijing
Attention:
Facsimile No:
With a copy to
Beijing Pharmaceutical Group Co. Ltd.
No. 30, Hetao Yuan, Guandongdian Bei Jie, Chao Yang
District, Beijing
Attention:
Facsimile No:
BMP:
Beijing Med-Pharm Corporation
1180 Main Street, Coventry, CT 06238
Attention: Edvin Norse
Facsimile No: 001-860-742-1598
ARTICLE 11 MISCELLANEOUS PROVISIONS
11.1 Neither Party may assign this
Agreement without the written consent of the
other
Party.
11.2 This Agreement is executed in
Chinese and English, each in eight (8)
originals.
Both
- 14 -
<PAGE>
language
versions shall be equally authentic.
11.3 Unless otherwise provided in this
Agreement, this Agreement is severable
in that if
any provision hereof is determined to be illegal or
unenforceable, the invalid provisions shall be deemed deleted
without
affecting
the remaining provisions of this Agreement. The Parties shall
attempt to
replace the invalid provisions with valid provisions as closely
aligned
with the original intent of the Parties as possible.
11.4 This Agreement including the
Schedules hereof constitutes the entire
agreement
between the Parties with respect to the subject matter hereof,
supersedes
any prior expression of intent or understanding relating hereto
and may
only be modified or amended by a written instrument signed by
the
authorized
representatives of the Parties.
IN WITNESS WHEREOF, the Parties hereto have
caused this Agreement to be executed
by their legal representatives or
authorized representatives on the date first
set forth above.
- 15 -
<PAGE>
SIGNATURE PAGE
BEIJING WANHUI PHARMACEUTICAL GROUP
BEIJING MED-PHARM CORPORATION
By: ILLEGIBLE
By: XIAOYING GAO
-----------------------------
-----------------------------
Name:
Name:
Title:
Title:
Nationality:
Nationality:
- 16 -
<PAGE>
CONFIRMATION LETTER OF BEIJING PHARMACEUTICAL GROUP CO., LTD.
As the sole shareholder of Beijing Wanhui
Pharmaceutical Group ("WANHUI GROUP")
and the state owned assets administrator as
authorized by Beijing State-owned
Asset Administration Commission, with
respect to the Share Transfer and Debt
Restructuring Agreement entered into by and
between Wanhui Group and Beijing
Med-Pharm Corporation ("BMP") dated
December 15, 2004, we confirm as follows:
1. We fully acknowledge
the content of the above Share Transfer and Debt
Restructuring Agreement, including its Schedules, and hereby
approve the
execution
and performance of such Agreement (including its Schedules) by
Wanhui
Group;
2. Should Wanhui Group be
dissolved or merged, or lose the capacity to
perform
the above-mentioned agreement (including its Schedules), we
shall
automatically take the place of Wanhui Group and become a party to
the
aforementioned agreement (including its Schedules) to perform all
its
duties and
be responsible for all its obligations therein. Meanwhile, we
shall
enjoy all its rights thereunder.
3. This confirmation
letter shall become effective upon being signed by our
authorized
representative and affixed with our official chop.
BEIJING PHARMACEUTICAL GROUP CO. LTD.
(Seal)
BEIJING PHARMACEUTICAL GROUP CO. LTD.
By:
Date: December 15, 2004
- 17 -
<PAGE>
SCHEDULE 1
SUMMARY OF THE ASSET EVALUATION REPORT
YUE PING BAO ZI [2004] NO. 035
This
summary highlights selected information contained elsewhere
in the
Asset Evaluation Report. If you want to know all the
information related to the evaluated project, you should
carefully
read the entire Asset Evaluation Report.
This
summary has the same legal effective as the main body of
the Asset
Evaluation Report.
As entrusted by Beijing Wanwei
Pharmaceutical Co. Ltd (hereinafter referred to
as "ENTRUSTING PARTY"), in accordance with
regulations related to asset
evaluation and based on the working
principles of independence, objectivity and
science, following recognized methods of
assets evaluations, Yuehua Certified
Public Accountants Co. Ltd (hereinafter
referred to as the "COMPANY") has
conducted evaluation on the assets and
liabilities which are entrusted to be
evaluated for the purpose of shares
transfer by adopting cost method. The
appraisers of the Company have gone through
necessary evaluation formalities,
including making on site visit to check and
verify the assets and liabilities,
and conducting necessary market
investigations and inquiry, and have reached
fair findings with respect to the market
value of the entrusted assets and
liabilities as dated April 30, 2004, the
base date of the evaluation. The assets
evaluation results are as following:
As of the Base Date, the book value of the
entrusted assets is RMB 76,782,600
yuan, the liabilities are RMB 106,892,700
yuan, and the net asset is minus RMB
30,110,100.00 yuan; after adjustment, the
book value of the asset of the Company
is RMB 76,782,600 yuan, the liabilities are
RMB 106,892,700 yuan, and the net
asset is minus RMB 30,104,000.00 yuan;
Assuming that the Company shall be
operated as an on-going concern and the net
assets shall be transacted at fair
market value, the appraisal value of the
assets of the Company as of the Base
Date shall be RMB 85,361,800,000.00 yuan,
the liabilities are RMB
106,892,700,000.00 yuan, the net asset is
minus RMB 21,530,900.00 yuan.
The appraisal results of all types of
assets and liabilities are indicated in
the below Consolidated Sheet of the Assets
Evaluations Results:
CONSOLIDATED SHEET OF THE ASSETS EVALUATIONS RESULTS
Base Date: April 30, 2004
The name of unit occupying the assets:
Wanwei Pharmaceutical Co. Ltd
- 18 -
<PAGE>
(RMB, in ten thousands)
<TABLE>
<CAPTION>
Appraisal
Adjusted
adjustment
Book net value
adjustment Value
Balance rate%
--------------
---------- ---------
--------
----------
Items
A
B
C
D=C-B E=D/Bx100
-----
--------------
---------- ---------
--------
----------
<S>
<C>
<C>
<C>
<C>
<C>
<C>
Current assets
1
7,229.16
7,229.77 7,982.50
752.73
10.41
Long-term
2
145.00
145.00
272.97 127.97
88.26
investments
Fixed assets
3
185.85
185.85
160.89 -24.96
-13.43
Amid: Buildings
4
Equipments
5
185.85
185.85
160.89 -24.96
-13.43
Projects
6
under constructing
Invisible assets 7
22.13
22.13
23.70
1.57
7.09
Amid: Land use
8
right
Other assets
9
96.12
96.12
96.12
TOTAL ASSETS
10
7,678.26
7,678.87 8,536.18
857.31
11.16
Current debts
11 10,687.27
10,687.27
10,687.27
Long-term debts 12
2.00
2.00
2.00
TOTAL DEBTS
13
10,689.27
10,689.27
10,689.27
NET ASSETS
14
-3,011.01
-3,010.40
-2,153.09 857.31
28.48
</TABLE>
Please refer to the evaluation breakdown
for the detailed information of the
appraisal conclusions.
This Report is just provided to the
Entrusting Party for the purpose indicated
herein. In accordance with the provisions
of the state-owned assets
administrations, the Report shall be
effective after the filing with the
state-owned assets administrations
authority.
The Report shall be valid for a period of
one year as of the base date of April
30, 2004.
The following matters herein should raise
special attention to the users of this
Report:
1. The adjustment and
appraisal to the assets and liabilities in the Report
is made
merely for the purpose of reflecting the assets value of
entrusted
assets.
The Company does not intent to request the Entrusting Party to
conduct
relevant accounting treatment pursuant to this Report. The
superior
financial and tax competent authority of the Entrusting Party
shall
decide whether and how relevant account treatment shall be
conducted.
2. Through the on-site
check, the value of 10 of the entrusted assets
increase.
This Report is made pursuant to the inventory check, and does
not adjust
the income tax thereof.
- 19 -
<PAGE>
3. The Report involves
inventories located at places outside of Beijing
amounting
RMB 7,130,400 yuan. Since the appraisers of the Company did not
make
on-site check, the value of such assets is made pursuant to
relevant
financial
materials provided by the enterprise, the descriptions and
undertakings by
the asset users, and by reference to the price standard as
of the
Base Date.
4. The assets and
liabilities entrusted by the Entrusting Party have been
audited by
the Company, and an Audit Report numbered as Yue Zong Sheng Zi
[2004] No.
A518 has been issued. The Report is based on such audit of the
Company.
5. The revenue for the
principal operating of the Entrusting Party and the
cost
thereof interperiodly booked, which may affect the accounts
receivables. Due to many reasons, we could not decide the amount
such
affected.
6. As of April 30, 2004,
the Wait deal intangible assets loss of the
Entrusting
Party is minus RMB 320,641.75 yuan, which is mainly caused by
RMB
4,981,308.65 yuan of uncollectible accounts receivables, and
RMB
5,301,950.40 yuan of account payable. The uncollectible
accounts
receivable
means those amounts that have been confirmed as uncollectible
after
review. However, RMB 1,394.58 yuan therein has been collected
during
the period
from February to April of 2004; the issues of those accounts
payables
relate to those beyond statue limitation or those, upon
inquiry,
is owed to
a party which is controlled by the same investor as the
Entrusted
Party, to whom the Entrusted Party also owes accounts payables.
Due to the
uncertainty of the above situations, we maintain the figures of
such
assets as they were. It shall be adjusted after the enterprise
provides
evidences. The amount of the net assets such affected is RMB
10,283,259.05 yuan.
7. Other receivables
related to Li Wenming is RMB 5,594,271.00 yuan. We could
not reach
reasonable conclusion with respect to the collectivibilty of
such
amount based on the materials provided by the Entrusted Party.
Hence,
we
maintain the figure as it is. This event was submitted to the
Prosecutors' Office of Beijing Xicheng district in 2002, and
then
transferred to the Beijing First Prosecutors' Office. As of the
report
date of
the Report, Beijing First Prosecutors' Office has filed lawsuit
to
Beijing
Intermediate People's Court. Since this case is still pending,
the
result
shall be adjusted in light of the court judgment. The amount of
the
net assets
such affected is RMB 5,594,271.00 yuan.
Legal Representative:
Registered Asset Appraiser:
Registered Asset Appraiser:
Beijing Yuehua Certified Public Accountants
Co. Ltd.
- 20 -
<PAGE>
Beijing China
June 16, 2004
- 21 -
<PAGE>
SCHEDULE 2
CONSENT LETTER ON WAIVING OF FIRST REFUSAL RIGHT
To: BEIJING MED-PHARM
CORPORATION
To whom it may concern:
RE: THE TRANSFER OF
80% SHARES OF BEIJING WANWEI PHARMACEUTICAL CO., LTD.
1. I, owning 20% shares
of the Beijing Wanwei Pharmaceutical Co., Ltd.
(hereinafter the "COMPANY"), hereby unconditionally:
2. consent Beijing
Med-Pharm Corporation ("BMP")'s acquisition of the 80%
equity
interest (hereinafter the "TRANSFERRED SHARES") in the Company
held
by Wanhui
Pharmaceutical Group ("WANHUI GROUP") in accordance with the
Share
Transfer and Debt Restructuring Agreement (hereinafter the
"SHARE
TRANSFER
AGREEMENT") entered into between BMP and Wanhui Group. This
Letter of
Consent shall become one appendix to the Share Transfer
Agreement;
3. expressly declare to
waive the right of first refusal to the Transferred
Shares;
4. undertakes to provide
all assistances necessary to complete
