Share Transfer and Capital
Increase Agreement
Shanghai Rongheng Pharmaceutical
Co. Ltd.
Shanghai CAS Shenglongda Biotech
(Group) Co., Ltd
Shanghai Rongheng International Trade Co., Ltd. of
Orient International (Holding) Co.
Yiliang Lou
Beijing Med-Pharm
Corporation
Share Transfer and Capital
Increase Agreement
This Share
Transfer and Capital Increase Agreement (this “ Agreement ”) is made
in Shanghai on Mar 15, 2007 by and among:
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(1)
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Shanghai CAS Shenglongda Biotech
(Group) Co., Ltd (“ Shenglongda
”), a company duly incorporated and legally existing under
the law of the People’s Repubilc of China (the
“PRC”), with its legal address at Room 208,
No. 6649, Chuanbei Road, Pudong New District, legal
representative being Gao Xiang;
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(2)
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Shanghai Rongheng International
Trade Co., Ltd. of Orient International (Holding) Co.
(“RHIT” ), a company duly incorporated and
legally existing under the law of the PRC, with its legal address
at 2-3 floors, Xiao Cheng Lu No. 58, Pudong New District,
legal representative being Zhou Jun;
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(3)
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Y iliang Lou, with the number of his
identity card being [
]; and
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(4)
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Beijing Med-Pharm
Corporation (“ BMP ”), a
corporation incorporated under the law of the State of Delaware,
the United States, with its domicile at 600 W. Germantown Pike,
Suite 400 Plymouth Meeting, PA, legal representative being
Xiaoying Gao (Title: Chief Executive Officer and President;
Nationality: USA).
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Shenglongda,
RHIT, Yiliang Lou and BMP hereinafter collectively referred to as
the “ Parties ”.
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(1)
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Whereas, Shanghai Rongheng
Pharmaceutical Co. Ltd. (the “ Company ”) is a
limited liability company duly incorporated under the law of the
PRC, with its registered capital being RMB 10 million, among which
Shenglongda holds 60% of its equity interests, RHIT holds 30%, and
Yiliang Lou holds 10%. For the purpose of this Agreement,
Shenglongda, RHIT and Yiliang Lou shall be collectively referred to
as the “ Existing Shareholders ”;
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(2)
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Whereas, the Existing Shareholders
unanimously agree that BMP may obtain 63.33% of the equity
interests of the Company by acquiring 45% of the equity interest
held by Shenglongda therein and further subscribing the
RMB5 million increased capital of the Company; and BMP wishes
to acquire 63.33% of the equity interests of the Company through
the above approaches;
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(3)
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Whereas, with respect to the share
transfer and capital increase set out in above
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(2), Shenglongda has carried out
state-owned assets appraisal and has obtained approval from China
Academy of Science, the state-owned assets administration
authority. Shenglongda has posted the share transfer at Shanghai
Lianhe Equity Exchange and BMP has become the transferee of such
shares. Shanghai Lianhe Equity Exchange has issued Shenglongda
Closing Notice on Equity Transfer;
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(4)
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Whereas, with respect to the capital
increase through the approaches set out in above (2), RHIT has
carried out state-owned assets appraisal and has obtained approval
from Orient International (Holding) Co, the state-owned assets
administration authority;
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(5)
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Whereas, the Company has reported to
the employees’ representative meeting in respect of the
restructuring of the Company with the participation of foreign
investment through means set out in above (2).
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Therefore, the
Existing Shareholders and BMP reach the following
agreement:
Article 1 Share Transfer and
Capital Increase
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1.1
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The
Existing Shareholders and BMP agree to transfer the equity interest
and increase the capital of the Company as follows:
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(1)
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Shenglongda agrees to transfer to
BMP 45% of the equity interest of the Company it holds.
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RHIT and Yiliang Lou hereby waiver
their respective pre-emption right to the above transferred equity
interest.
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(2)
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While Shenglongda transfers its
equity interest as per above (1), the Existing Shareholders agree
that the registered capital of the Company shall be increased to
RMB 15 million from RMB 10 million. The amount of the
increased capital is RMB 5 million (the “ Amount of
Increased Capital ”). BMP agrees to subscribe the Amount
of Increased Capital. The Existing Shareholders waive their
respective pre-emption right to the Amount of Increase
Capital.
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(3)
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Upon the completion of the above
share transfer and capital increase, the share structure of the
Company shall be as follows:
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BMP
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63.33
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%
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Shenglongda
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10
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%
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RHIT
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20
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%
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1.2
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Within five (5) working days
after the date hereof, the parties shall cause the Company to
submit this Agreement together with other necessary application
documents to the Ministry of Commerce or its authorized authority
(the “ Examination and Approval Authority
”).
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1.3
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The
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 formalities with Shanghai
Administration for Industry and Commerce (the “
Registration Authority ”) and to obtain other
government approval, verification or registration which are
required for the purpose of implementing the share transfer and
capital increase hereunder.
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Article 2 Payment of the
Transfer Price and the Amount of Increased Capital
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2.1
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The
Parties agree that when part or all of the following conditions
have been fully satisfied (depending on the situations provided
under Articles 2.2 and 2.3), BMP shall perform its payment
obligation set out in Articles 2.2 and 2.3 hereunder:
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(1)
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With respect to the share transfer
and capital increase provided herein, Shenglongda has obtained
approval from the state-owned assets administration
authority and
has posted the share transfer at Shanghai Lianhe Equity Exchange
and BMP has become the transferee of the transferred shares. The
Closing Notice on Equity Transfer is attached hereto as
Schedule 1;
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(2)
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With respect to the capital increase
provided herein, RHIT has obtained approval from the state-owned
assets administration authority;
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(3)
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The
share transfer and capital increase contemplated under this
Agreement, the Joint Venture Agreement entered into by and among
BMP and the Existing Shareholders, and the revised and restated
Articles of Association of the Company have been approved by the
Examination and Approval Authority and the Company has been issued
with the relevant approval reply and the Approval Certificate of
Foreign Investment Enterprise;
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(4)
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The
share transfer and capital increase contemplated under this
Agreement,
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the
Joint Venture Agreement entered into by and among BMP and the
Existing Shareholders, and the revised Articles of Association of
the Company have been effected with Shanghai Administration for
Industry and Commerce (the “ Registration Authority
”). The Company has received the revised Business
License;
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(5)
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The
Company has completed the foreign exchange registration and has
opened foreign exchange capital account; and
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(6)
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There shall have been no material
adverse change (including any undisclosed indebtedness) in the
financial condition, operations or business prospects of the
Company from the base date set out in the appraisal report
submitted by Shenglongda and RHIT for the share transfer and
capital increase hereunder till the expiration of the Transition
Period defined in Article 4.1, with the exception of any such
change resulting from an action or inaction taken by the Company
with the approval of the Supervision Committee defined in
Article 4.1. For the purpose of this Agreement, material
adverse change means the reduced amount of the net assets of the
Company exceeds 15% (inclusive) of the net assets determined
in the above-mentioned appraisal report.
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2.2
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Subject to the satisfaction of each
and every conditions set out in Article 2.1 (with the
exception of Article 2.1(4)), BMP shall input the Amount of
Increased Capital into the Company in RMB in a lump sum when the
Company applies for the revised Business License;
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2.3
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The
Parties agree that, with respect to the share transfer set out in
Article 1.1(1), subject to the satisfaction of each and every
conditions set out in Article 2.1, BMP shall pay Shenglongda
RMB 6 million or other amount adjusted as per the sub-section
of this Article 2.3 as the share transfer price (the “
Transfer Price ”) the Company obtains the revised
Business License, including an amount equal to the Warranty Deposit
as provided under Article 2.4.
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If
the condition set out in Article 2.1(6) is not satisfied on
the day when the Company obtains the revised Business License, BMP
shall have the option to choose to:
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(1)
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terminate this Agreement;
or
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(2)
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continue to perform this Agreement.
However, the Transfer Price shall be reduced by an amount
equivalent to the portion of the reduced amount to
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the
net assets of the Company calculated by the percentage of the
acquired equity interests. Where the adjusted amount caused by such
adverse change, which shall be determined by the appraisal result
issued by mutually recognized appraiser, has not been determined
prior to the time when BMP is obliged to make the payment, the
Parties agree that the payment term shall be extended
accordingly.
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2.4
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After BMP becomes the transferee
during the course of the posting process and within 5 working days
after the execution of this Agreement, BMP shall apply to Shanghai
Lianhe Equity Exchange for opening of an warranty account for an
amount equivalent to RMB 1.2 million (“ Warranty
Deposit ”) and BMP and Shenglongda shall sign necessary
document with Shanghai Lianhe Equity Exchange for effecting such
account.
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Upon the satisfaction of each and
every condition set out in Article 2.1 and subject to the
verification of relevant administration of foreign exchange, the
Warranty Deposit will be paid to Shenglongda as part of the
Transfer Price in accordance with Article 2.3.
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If
any condition set out in Article 2.1 is not satisfied prior to
the expiration of the warranty account, Shenglongda shall assist
BMP to go through the procedures as to the remittance of the
Warranty Deposit abroad unless the Parties have agreed to continue
to perform this Agreement. Where the Parties agree to continue to
perform this Agreement, BMP shall apply to relevant administration
of foreign exchange for the renewal of the warranty
account.
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2.5
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BMP
shall make payment to Shenglongda in accordance with
Article 2.3 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. Shenglongda
shall notify BMP in writing of its bank account to receive such
payment and the payment itinerary in advance and shall take all
necessary actions to assist BMP in going through relevant foreign
exchange registration.
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2.6
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The
Existing Shareholders agree and acknowledge that BMP shall have no
payment obligations towards the Existing Shareholders for its
acquisition of the 63.33% equity interests of the Company except
for those expressly provided herein.
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Article 3 Settlement of
Indebtedness of the Company
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3.1
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BMP, Shenglongda and RHIT agree that
after the completion of the share transfer and capital increase
provided herein, it will assist the Company to solve the
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funding required for the future
development of the Company as per its equity percentage.
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3.2
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With respect to the following
indebtedness of the Company, based on the principal of “first
lending, first repaid”, the Parties hereby agree to the
arrangement as follows:
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(1)
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As
of the date hereof, Shenglongda has advanced RMB 2.65 million
to the Company. The Company shall repay such facility no later than
three years after the completion of the share transfer and capital
increase provided herein.
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(2)
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As
of the date hereof, a subsidiary of RHIT, has advanced RMB
9.4 million t
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