Exhibit 1
The agreement is signed in Suzhou City, Jiangsu Province of China on June 11,
2005 by the following parties
Party A: 38 persons including and represented by Shi Mingsheng
Address: No. 859, Panxu Road, Canglang District, Suzhou City
Tel: 86-512-68207173
Fascimile: 86-512-68202801
Representative: Shi Mingsheng Nationality: Chinese
Party B: China Biopharmaceuticals Holdings Inc.
Contact Address: Suite 2005, 156 West 56th St., New York 10019, USA
Tel: 917-650-9201
Fascimile: 212-3101682
Representative: MAO, Peng Nationality: Canada
(1) Party A (consisting of 38 persons) is all the shareholders (For
details of shareholders, please see attached List of Shareholders) of
Suzhou Erye Pharmaceutical Limited Company (Referred to as "Erye"
hereafter), a legally registered limited liability company established
according to the laws of the People's Republic of China ("China")
laws, who authorizes its representative Shi Mingsheng to represent all
the shareholders to sign this agreement (For details, please see the
Trust Deed); Party B is a legally registered limited liability company
according to Delaware Law of the United States of America ("U.S.A.").
(2) In Accordance with The Company Law of China, The Contract Law of China
as well as other prevailing laws and regulations, Part B decides to
make investment in Erye, and Erye will become a foreign-invested
company according to Chinese laws (Referred to as the "Joint Venture"
hereafter).
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(3) The Joint Venture will maintain its original business scope of Erye
(4) If the remaining issues regarding the operation and development of the
Joint Venture related to this cooperation are not fully provided for
in detail in this agreement, the both parties will make supplementary
provisions and conduct negotiations to resolve the issues according to
the relevant regulations and specified principles stipulated within
this agreement.
1. Representations and Warranties
1.1. The representations and warranties jointly made by the both parties
are listed as follows:
(1) The both parties have all the civil rights and capacity of disposition
and are qualified for signing and implementation of this agreement,
and at the same time, the signing and implementation of this agreement
will not violate any or all the legal documents such as regulations on
the Company Regulation, Contract and Agreement which imposes certain
restrictions on it.
(2) The both parties have already carried out all the required actions or
will do so, to obtain the consent, approval, authorization and permit
required by signing and implementation of this agreement.
(3) In keeping with the principles of reliability and creditability and
responsibility, both parties will make utmost efforts to work in close
cooperation to promote the smooth implementation of this agreement.
The parties will follow the principles set forth within this
agreement, and will not impede the implementation of this agreement.
The representations and warranties that Party A makes to Party B are as
flows:
1.2. The representations and warranties that Party A makes to Party B are
listed as follows:
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(1) All the materials having been or to be provided by party A are
authentic, complete, accurate with no misleading information.
(2) The registered capital of Erye has been fully contributed; Erye owns
the legal ownership and use rights of the total assets.
(3) Erye has obtained necessary rights and permits, authorizations,
approvals and consent required for medicine production and business
operation (At least include business license issued by the Industry
and Commerce Administrative Bureau). The business scope of Erye does
not go beyond the operational scope approved as well as the rules of
the Company's articles.
(4) Within 30 working days after this agreement is signed, Party B will
dispatch an auditing recognized by SEC of U.S.A. to conduct auditing
of Erye, Party A and Erye promise to make full cooperation with the
auditing firm.
(5) Both parties promise that the signing and implementation of this
agreement will not generate any serious negative impacts on operation
and profit contribution of Erye.
(6) Party A shall reveal all the issues regarding the mortgage of assets,
sponsor and related lawsuit and arbitration as well as administrative
penalties received etc.
(7) Party A hereby agrees with Party B that it will effect the appropriate
registration for the Company with the State Administration of Industry
and Commerce within 14 working days of the execution of this
agreement. Both parties agree that before the Joint Venture's business
license is obtained, unless Party B agrees in writing :
i. There will be no material change in the contributed assets and
debt of Erye and Party A will maintain normal cash flow for the
operational activities;
ii. Erye is not allowed to distribute dividends to Erye's existing
shareholders;
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iii. Erye will not change its status of actual control and its
articles.
(8) Within 14 working days of obtaining the business license of the Joint
Venture, both parties shall convene the first meeting of the board of
directors of the Joint Venture.
1.3. The representations and warranties that Party B makes to Party A are
listed as follows:
(1) All the materials having been or to be provided to party A are
authentic, timely and complete.
(2) Duly implement the capital contribution obligations.
(3) Party B recognizes all the contracts entered into before the
establishment of Joint Venture, and will cause the Joint Venture to
duly fulfill the implementation of this agreement.
2. Investment
2.1. The scope of the capital assets of this cooperation refers to the
total assets appearing on the financials of Erye.
2.2. This joint investment adopts method of increasing registered capital.
After the completion of investment from Party B, Erye will become a
foreign-invested company with Party A holding 49% of the total shares and
Party B holds 51 % of the total shares of the Company.
3. Arrangement of the transaction
3.1. Party B or its wholly owned Subsidiary, China Biopharmaceuticals
Corp., shall pay US$2,200,000 in cash to the Joint Venture and at the same
time acquire the increased capital of Erye. Party B promises to party A
that within 30 working days after the auditing result is completed Party B
will remit US$ 1,200, 000 in cash to the Foreign Currency Bank Account of
the Joint Venture, and will remit the remaining US$1, 000, 000 in cash to
the Foreign Currency Bank Account of the Joint Venture within 90 working
days after the first payment is made.
3.2. Party B or its wholly owned subsidiary, China Biopharmaceuticals
Corp., shall remit US$800,000 in cash to Fullbright Finance Limited. Within
the ten working days after this agreement is signed, Party B shall remit
Fullbright Finance Limited US$200,000, and will remit the remaining
US$600,000 in cash to Fullbright Finance Limited within 90 working days
after finalizing the auditing of Erye.
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3.3. Within 30 working days after this agreement is signed, Party B shall
distribute 700,000 shares of common stock to Highacheive Holdings Limited,
1,300,000 shares of common stock to Purewealth Finance Limited, and
1,000,000 shares of common stock to Future View Finance Limited.
3.4. Arrangement of rewards
Under the precondition that the Joint Venture finalizes the auditing report
and also accomplishes the performance requirements, Party B shall
distribute 300,000 shares of its common stock to Party A or its assigned
natural person or legal representative before January 31st, 2006.
3.5. On the base of accomplishment of this transaction, the transaction
price paid by party B is US$3,000,000 with 3,300,000 shares of common stock
of Party B.
4. The board of directors of the Joint Venture
4.1. The board of directors of the Joint Venture consists of six persons,
three of whom are appointed by Party A and three of whom are appointed by
Party B. Among the directors appointed by Party A, one of whom shall be
recommended to act as director of Party B subject to the approval of Party
B's shareholders. If this director fails to be elected director of board of
Party B, then this director shall have the right to audit the meeting of
the board of directors of Party B, enjoying the right to full knowledge of
the operation of Party B subject to the duty of confidentiality.
The Chairman of the board shall be appointed by party A, and the chief
financial officer shall be appointed by party B.
When the Joint Venture is initially set up, Shi Mingsheng will be the
Chairman of the board of the Joint Venture. Meanwhile, Party B shall
recommend to its shareholders that Shi Mingsheng hold the position of
director of board of Party B.
4.2. The important events of the Joint Venture shall be voted and approved
by 75% of the total directors of the board, and the important events shall
mainly include but not limited to the followings:
(1) Modification of article of the Joint Venture.
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(2) Disposal of all the key assets of the Joint Venture.
(3) Change of structure of managerial level.
(4) External sponsorship, mortgages, hypothecation and loans.
(5) Determine the operational plan and investment plan of the Joint
Venture.
(6) Others related to the key development plans and orientations of the
Joint Venture.
(7) The insider transactions among the company, shareholders and other
relevant parties.
4.3. Other than listed on article 4.2., when events are voted in tie
without a simple majority then it shall be determined and final approved by
the chairman of board.
5. Finance and taxation
The transaction price set does not include the undistributed profits of
Erye before the ownership has transferred, which shall be owned by the
original shareholders of Erye. The specific definition of the undistributed
profits of Erye before the ownership has transferred is that the
undistributed profits of Erye on the day Party A and Party B sign the
agreement and jointly recognized by the both parties plus the generated
reasonable profits during the period of the day the agreement is signed to
the day the ownership has transferred to Party B.
6. Operation and development
6.1. While Party B is making investment in Erye, Party A and Party B
promise that the both parties or their related parties (companies) neither
engage in or get involved in the production of the chemical medicine
products individually or by cooperating with the third party which causes
direct competition between the Parties and Erye, nor enjoying any rights or
benefits within companies abovementioned.
6.2. Party B promises that after the establishment of the Joint Venture,
Party B shall get approval of the Joint Venture before determines to make
investment in or establish joint operations with any chemical drugs
manufacturer which might compete against the Joint Venture,.
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6.3. Considering the long period of input and output of medicine industry,
and to ensure the stable development of the Joint Venture, after the
establishment of the Joint Venture, Party B promises that it will introduce
the new drugs and technology through project cooperation etc. The Joint
Venture is in charge of business operation, and the reserved cash flow will
not be used when the new drugs technology is obtained, and the profit
distribution are to be negotiated and determined by Party B and the Joint
Venture later. The specific contents in this regard is to be stipulated in
formal contract of specific projects.
Party B promises that within the first three years after the establishment
of the Joint Venture, the capital used in this project shall not be lower
than US$500,000 annually.
7. Distribution of profits of the disposal of the land use right
7.1. The scope of the land use right refers to the land assets of Erye
Pharmaceutical Co., Ltd., namely No. 859, Panxu Road, Suzhou City with an
area of 45024.2m(2).
7.2. Objective of the disposal of the land is to coordinate with the
government's land developing plan as well as for the long-term development
of the Joint Venture.
7.3. The Joint Venture is planning to relocating. Party B or the investor
introduced by Party B promises that it shall bear the removal fees and
construction fees for the Joint Venture's new plant, and all assets
generated from this relocation belongs to the Joint Venture. The Joint
Venture shall appoint Mr. Shi Mingsheng to take charge of this issue of
establishing a company specifically for this land developing project.
7.4. 49% of the proceeds obtained from the disposal of the land right shall
belong to SFuzhou Erye Economic and Trade Limited Company, and the
remaining proceeds is used for expansion and increasing production of the
Joint Venture.
8. The prerequisite condition of this cooperation is that Party B shall be
re-listed on the Nasdaq Stock Market, otherwise, the both parties shall
resume the property rights of the existing assets to the original state
before this agreement is signed.
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9. After successful cooperation of the both parties, Party A has rights to
transfer its owned shares of Erye to Party A's controlled companies. Under
this circumstance, Party B shall waive its priority of purchasing.
10. Others
10.1. This agreement is not allowed to be terminated by one side without
breach, and shall be governed by Chinese laws.
10.2. If any of the parties breaches the agreement, the non-breaching party
has rights to ask the breaching party for compensations due to breach of
agreement.
10.3. If the proposal, contracts and articles having been signed between
Party A and Party B and having been delivered to the relevant governmental
organizations for inspection and approval and this agreement signed is
found to have different interpretation, this agreement shall take effect.
10.4. If any dispute arises between the two parties, the dispute shall be
negotiated and settled within 30 working days. If the negotiation fails,
the two parties can go to the Chinese International Economic and Trade
Arbitration Committee to have arbitration.
10.5. For issues fails to be mentioned in this agreement, the two parties
may sign supplementary agreement or attachment, which forms effective
components of this agreement with the same legal effect.
10.6. This agreement is in quadruplicate, with two copies held by each
party.
Party A: 38 persons including and represented by Shi Mingsheng
Authorized representative:
Party B: China Biopharmaceuticals Holdings Inc.
Authorized representative:
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