UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 
 
 
Date of report (Date of earliest event reported):  
May 17, 2012 (May 15, 2012)

 
CHINA JO-JO DRUGSTORES, INC.
(Exact name of registrant as specified in its charter)

 
Nevada
 
001-34711
 
98-0557852
(State or other jurisdiction
of incorporation)
 
(Commission File No.)
 
(IRS Employer
Identification No.)

 
Room 507-513, 5th Floor, A Building, Meidu Plaza
Gongshu District, Hangzhou, Zhejiang Province
People’s Republic of China
   
(Address of principal executive offices)
 
(Zip Code)
 

Registrant’s telephone number,   including area code
+86 (571) 88077078


N/A
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
 
Item 1.01
Entry into a Material Definitive Agreement.

On May 15, 2012 (the “Effective Date”), Zhejiang Jiuxin Investment Management Co., Ltd. (“Jiuxin Management”) entered into a series of contractual arrangements with Zhejiang Jiuying Grand Pharmacy Co., Ltd. (“Jiuying Pharmacy”) and three of its five equity owners.  Jiuxin Management is one of the registrant’s wholly-owned subsidiaries in the People’s Republic of China (“China” or the “PRC”).

Jiuying Pharmacy was established in the PRC on February 27, 2012.  The five equity owners of Jiuying Pharmacy include two of the registrant’s wholly-owned subsidiaries in China, namely, Zhejiang Shouantang Medical Technology Co., Ltd. (“Shouantang Technology”) (39.00%), and Jiuxin Management (10.00%).  The other three equity owners are the co-founders of the registrant’s pharmacy business in China, namely, Mr. Lei Liu (19.89%), Mr. Chong’an Jin (15.81%), and Ms. Li Qi (15.30%) (collectively the “Owners”).

The contractual arrangements are comprised of a series of five agreements:

  
Pursuant to the Consulting Services Agreement, Jiuxin Management has the exclusive right to provide Jiuying Pharmacy with general business operation services, including advice and strategic planning, as well as consulting services related to their current and future operations (the “Services”).  Additionally, Jiuxin Management owns the intellectual property rights developed or discovered through research and development, in the course of providing the Services, or derived from the provision of the Services. Jiuying Pharmacy pays Jiuxin Management a quarterly consulting service fees equal to 51% of its profits for such quarter.  This agreement is in effect from May 15, 2012 to the last date of Jiuying Pharmacy’s term in operation, as may be extended.  Jiuxin Management may also terminate the agreement if Jiuying Pharmacy breaches the terms of the agreement, or without cause.

  
Pursuant to the Operating Agreement, Jiuxin Management agrees to guarantee Jiuying Pharmacy’s performance of its agreements with any third party.  In return, the Owners must appoint designees of Jiuxin Management to Jiuying Pharmacy’s board of directors and senior management.  In addition, Jiuying Pharmacy agrees to pledge its accounts receivable and all of its assets to Jiuxin Management.  Moreover, Jiuying Pharmacy will not engage in any transactions that could materially affect its respective assets, liabilities, rights or operations without Jiuxin Management’s prior consent.  Jiuying Pharmacy will also abide by corporate policies set by Jiuxin Management with respect to its daily operations, financial management and employment issues.  The term of this agreement is from May 15, 2012 until the maximum period of time permitted under PRC law.  On the other hand, Jiuying Pharmacy cannot terminate this agreement.

  
Pursuant to the Voting Rights Proxy Agreement, the Owners irrevocably grant Jiuxin Management and its designee with the right to exercise their voting and other ownership rights in Jiuying Pharmacy, as well as the rights to sell or transfer all or any of their equity interests in Jiuying Pharmacy.  This agreement may be terminated by mutual consent of the parties or upon 30-day written notice from Jiuxin Management.

  
Pursuant to the Equity Pledge Agreement, the Owners have pledged all of their equity interests in Jiuying Pharmacy to Jiuxin Management in order to guarantee Jiuying Pharmacy’s performance of its obligations under the Consulting Services Agreement.  If Jiuying Pharmacy or the Owners breach their obligations to Jiuxin Management, Jiuxin Management, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests.  The Owners have also agreed that upon occurrence of any event of default, Jiuxin Management shall be granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the Owners to carry out the security provisions of this agreement and take any action and execute any instrument that Jiuxin Management may deem necessary or advisable to accomplish the purposes of this agreement.  The Owners agree not to dispose of the pledged equity interests or take any actions that would prejudice Jiuxin Management’s interests.  This agreement will expire two (2) years after Jiuying Pharmacy’s obligations under the Consulting Services Agreements have been fulfilled.

  
Pursuant to the Option Agreement, the Owners irrevocably grant Jiuxin Management or its designee an exclusive option to purchase, to the extent permitted under PRC law, all or part of their equity interests in Jiuying Pharmacy for the cost of their initial contributions to the registered capital or the minimum amount of consideration permitted by applicable PRC law.  Jiuxin Management or its designee has sole discretion to decide when to exercise the option, whether in part or in full.  The term of this agreement is from May 15, 2012 to the maximum period of time permitted by law.
 
The foregoing description of the five agreements is qualified in its entirety by the copies thereof attached as Exhibits 10.1 to 10.5 to this Current Report on Form 8-K.

 
 

 
 
Jiuying Pharmacy was established for the registrant to hold the maximum amount of equity interests that a non-PRC citizen can hold in the retail pharmacy business under applicable PRC laws (49.00%).  Currently, neither the registrant nor its subsidiaries hold any equity interests in Hangzhou Jiuzhou Grand Pharmacy Chain Co., Ltd. (“Jiuzhou Pharmacy”), which operates the “Hangzhou Jiuzhou Grand Pharmacy” stores, or Shanghai Lydia Grand Pharmacy Co., Ltd. (“Shanghai Lydia”), a wholly-owned subsidiary of Jiuzhou Pharmacy which operates the “Lydia Grand Pharmacy” stores.  Instead, the registrant controls Jiuzhou Pharmacy and Shanghai Lydia through contractual arrangements identical to those that Jiuxin Management entered into with Jiuying Pharmacy and the Owners.  With the establishment of Jiuying Pharmacy, a majority of Hangzhou Jiuzhou Grand Pharmacy stores is intended to be shifted to Jiuying Pharmacy and become “Jiuying Grand Pharmacy” stores, although the timing of such has not yet been established.

Shouantang Technology was made a party to the Operating Agreement, the Voting Rights Proxy Agreement, the Equity Pledge Agreement and the Option Agreement for the sole purpose of acknowledging such agreements.  

Item 8.01
Other Events.

On May 17, 2012, the registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1, and the information in Exhibit 99.1 is incorporated herein by reference.

The information in Items 8.01 and 9.01(d) in this Current Report on Form 8-K and Exhibit 99.1 shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such a filing.

Item 9.01
Financial Statement and Exhibits.

(d)
EXHIBITS

Exhibit Number
 
Description
10.1 
 
Consulting Services Agreement dated May 15, 2012. 
10.2
 
Operating Agreement dated May 15, 2012.
10.3
 
Voting Rights Proxy Agreement dated May 15, 2012.
10.4
 
Equity Pledge Agreement dated May 15, 2012.
10.5
 
Option Agreement dated May 15, 2012.
99.1
 
Press release dated May 17, 2012.
 
 
 

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

   
CHINA JO-JO DRUGSTORES, INC.
 
Date:
May 17, 2012
(Registrant)
 
         
   
By:
/s/ Ming Zhao
 
     
Ming Zhao
 
     
Chief Financial Officer
 
 
Exhibit 10.1

CONSULTING SERVICES AGREEMENT

This Consulting Services Agreement (this “ Agreement ”) is dated May 15, 2012, and is entered into in Hangzhou City, People’s Republic of China (“PRC” or “China”) by and between Zhejiang Jiuxin Investment Management Co., Ltd (“Party A”) and Zhejiang Jiuying Grand Pharmacy Co., Ltd. (“Party B”). Party A and Party B are referred to collectively in this Agreement as the “ Parties .”

RECITALS

(1)  
Party A, a company incorporated in the PRC as a foreign invested enterprise, specializes in enterprise management and consultation;

(2)  
Party B is mainly engaged in retail of prescription and non-prescription drugs including traditional Chinese medicinal materials, Chinese prepared medicines, cut crude drugs, pharmaceutical chemicals, antibiotics, biochemical drugs, and biological products; retail of pre-packaged food and dairy products (including  milk-based powdered infant formulas)  and retail of general merchandise (collectively the “Business”);

(3)  
The Parties desire that Party A provide Party B with consulting and other relevant services in connection with the Business; and

The Parties are entering into this Agreement to set forth the terms and conditions under which Party A shall provide consulting and other related services to Party B.
 
NOW THEREFORE, the Parties agree as follows:
 
1.
DEFINITIONS
 
1.1        In this Agreement the following terms shall have the following meanings:
 
Affiliate ,” with respect to any Person, shall mean any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person.  As used in this definition, “control” shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether by ownership of securities or partnership or other ownership interests, or by contract or otherwise);
 
 
 

 
 
Consulting Services Fee ” shall be as defined in Clause 3.1;
 
Indebtedness ” shall mean, as to any Person, any one of the following: (i) money borrowed by such Person (including principal, interest, fees and charges) for the deferred purchase price of any property or services, (ii) the face amount of all letters of credit issued to such Person and all drafts drawn thereunder, (iii) all liabilities secured by any Encumbrance on any property owned by such Person, whether or not such liabilities have been assumed by such Person, (iv) the aggregate amount required to be capitalized under any lease for which such Person is the lessee, or (v) all contingent obligations (including, without limitation, all guarantees to third parties) of such Person;
 
Encumbrance ” shall mean any guarantee, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under recording or notice statute, and any lease having substantially the same effect as any of the foregoing);
 
Person ” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization, entity or other organization or any government body;
 
PRC ” means the People’s Republic of China;
 
Services ” means the services to be provided under the Agreement by Party A to Party B, as more specifically described in Clause 2.

1.2       The headings in this Agreement shall not affect the interpretation of this Agreement.
 
2.
RETENTION AND SCOPE OF SERVICES

2.1      Party B hereby agrees to retain the services of Party A, and Party A accepts such appointment, to provide to Party B services in relation to the current and proposed operations of Party B’s business in the PRC pursuant to the terms and conditions of this Agreement (the “ Services ”).  The Services shall include, without limitation:

 
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(a)            General Business Operation .  Provide general advice and assistance relating to the management and operation of Party B’s business.
 
(b)            Human Resources .
 
(i)           Provide general advice and assistance in relation to the staffing of Party B, including assistance in the recruitment, employment and secondment of management personnel, administrative personnel and staff of Party B
 
(ii)          Provide training of management, staff and administrative personnel;
 
(iii)         Assist Party B to establish an efficient payroll management system; and
 
(iv)         Provide assistance in the relocation of Party B’s management and staff;
 
(c)            Business Development . Provide advice and assistance in business growth and development of Party B.
 
(d)            Other .  Such other advice and assistance as may be agreed upon by the Parties.

2.2       Exclusive Services Provider .  During the term of this Agreement, Party A shall be the exclusive provider of the Services.  Party B shall not seek or accept similar services from other providers without the prior written approval of Party A.
 
2.3       Intellectual Property Rights Related to the Services .  Party A shall own all intellectual property rights developed or discovered through research and development in the course of providing Services, or derived from the provision of the Services.  Such intellectual property rights shall include patents, trademarks, trade names, copyrights, patent application rights, copyright and trademark application rights, research and technical documents and materials, and other related intellectual property rights including the right to license or transfer such intellectual property rights.  If Party B requires the use of Party A’s intellectual property rights, Party A agrees to grant such intellectual property rights to Party B on terms and conditions to be set forth in a separate agreement.
 
 
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Consulting Services Agreement

 
 
2.4        Pledge .  Party B shall permit and cause the owners of Party B to pledge their equity interests in Party B to Party A for securing the payment of the Consulting Services Fee as required pursuant to this Agreement.

3.      PAYMENT
 
3.1        General .
 
(a)           In consideration of the Services to be provided by Party A hereunder, Party B shall pay to Party A a consulting services fee (the “ Consulting Services Fee ”) during the term of this Agreement, payable each quarter, equal to 51% of Party B’s net profit after tax payment for such quarter based on the quarterly financial statements provided under Clause 5.1 below. Such quarterly payment shall be made within fifteen (15) days after receipt by Party A of the financial statements referenced above.
 
(b)           Party B will permit, from time to time during regular business hours as reasonably requested by Party A, its agents or representatives (including independent public accountants, which may be Party B’s independent public accountants), (i) to conduct periodic audits of the financial books and records of Party B, (ii) to examine and make copies and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of Party B, (iii) to visit the offices and properties of Party B for the purpose of examining such materials described in clause (ii) above, and (iv) to discuss matters relating to the performance by Party B hereunder with any of the officers or employees of Party B having knowledge of such matters.  Party A may exercise the audit rights described herein at any time, provided that Party A provides a ten (10) day written notice to Party B specifying the scope, purpose and duration of such audit.  All such audits shall be conducted in such a manner as not to interfere with Party B’s normal operations.

3.2       Party B shall not be entitled to set off any amount it may claim is owed to it by Party A against any Consulting Services Fee payable by Party B to Party A unless Party B first obtains Party A’s prior written consent.
 
3.3       The Consulting Services Fee shall be paid in RMB by telegraphic transfer to Party A’s bank account, or to such other account or accounts as may be specified in writing from time to time by Party A.
 
 
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3.4       Should Party B fail to pay all or any part of the Consulting Services Fee due to Party A in RMB under this Clause 3 within the time limits stipulated, Party B shall pay to Party A interest in RMB on the amount overdue based on the three (3) month lending rate for RMB published simultaneously by the Bank of China on the relevant due date.
 
3.5      All payments to be made by Party B hereunder shall be made free and clear and without any consideration of tax deduction, unless Party B is required to make such payment subject to the deduction or withholding of tax.

4.       FURTHER TERMS OF COOPERATION
 
         All business revenue of Party B shall be directed in full by Party B into a bank account(s) supervised by Party A.

5.       UNDERTAKINGS OF PARTY B
 
         Party B hereby agrees that, during the term of the Agreement:

5.1       Information Covenants .  Party B shall provide to Party A:
 
5.1.1        Preliminary Monthly Reports . Within five (5) days after the end of each calendar month the preliminary income statements and balance sheets of Party B made up to as of the end of such calendar month, in each case prepared in accordance with the generally accepted accounting principles of the PRC.
 
5.1.2        Final Monthly Reports . Within ten (10) days after the end of each calendar month, a final report from Party B on the financial and business operations of Party B as of the end of such calendar month, setting forth the comparison of financial and operation figures for the corresponding period in the preceding financial year, in each case prepared in accordance with generally accepted accounting principles of the PRC.
 
5.1.3        Quarterly Reports . As soon as available and in any event within forty-five (45) days after each Quarterly Period (as defined below), unaudited consolidated and consolidating statements of income, retained earnings and changes in financial positions of Party B and its subsidiaries for such Quarterly Period, and for the period from the beginning of the relevant fiscal year to such Quarterly Date, and the related consolidated and consolidating balance sheets as of such Quarterly Period, setting forth in each case the actual versus budgeted comparisons and a comparison of the corresponding consolidated and consolidating figures for the corresponding period in the preceding fiscal year, accompanied by a certificate of Party B’s Chief Financial Officer, and such certificate shall state that the said financial statements fairly represent the consolidated and consolidating financial conditions and results of operations, as the case may be, of Party B and its subsidiaries, in accordance with the general accepted accounting principles of the PRC for such period (subject to normal year-end audit adjustments and the preparation of notes for the audited financial statements).  For the purpose of this Agreement, a “ Quarterly Period ” shall mean the last day of March, June, September and December of each year, the first of which shall be the first Quarterly Period following the date of this Agreement; provided that if any such Quarterly Period is not a business day in the PRC, then such Quarterly Period shall be the next succeeding business day in the PRC.
 
 
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Consulting Services Agreement

 
 
5.1.4        Annual Audited Accounts .  Within 90 days after the end of the financial year, Party B’s annual audited accounts (setting forth in each case the comparison of the corresponding figures for the preceding financial year), shall be prepared in accordance with the generally accepted accounting principles of the PRC.
 
5.1.5         Budgets . At least ninety (90) days prior to the beginning of Party B’s fiscal year, Party B shall prepare a budget in a form satisfactory to Party A (including budgeted statements of income and sources and uses of cash and balance sheets) for each of the four quarters of such fiscal year accompanied by the statement of Party B’s Chief Financial Officer, to the effect that, to the best of his or her knowledge, the budget is a reasonable estimate for the corresponding period.
 
5.1.6         Notice of Litigation . Party B shall notify Party A, within one (1) business day of obtaining the knowledge thereof, of (i) any litigation or governmental proceeding pending against Party B which could materially adversely affect the business, operations, property, assets, condition or prospects of Party B, and (ii) any other event which is likely to materially adversely affect the business, operations, property, assets, condition or prospects of Party B.
 
5.1.7        Other Information .  From time to time, such other information or documents as Party A may reasonably request.

5.2        Books, Records and Inspections .  Party B shall keep accurate books and records of its business activities and transactions according with PRC’s generally accepted accounting principles and all other legal requirements.  During an appropriate time and within a reasonable scope requested by Party A, Party B will permit Party A’s officers and designated representatives to visit the premises of Party B and to inspect, under the guidance of Party B’s officers, Party B’s books and records, and to discuss the affairs, finances and accounts of Party B.
 
 
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Consulting Services Agreement

 
 
5.3        Corporate Franchises .  Party B will do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and maintain its material rights and licenses.
 
5.4        Compliance with Laws .  Party B shall abide by all applicable laws, regulations and orders of all relevant governmental administration, in respect to its business and the ownership of its property, including, without limitation, maintenance of valid and proper governmental approvals and licenses necessary to provide the services, unless such noncompliance could not, in the aggregate, have a material adverse effect on the business, operations, property, assets, condition or prospects of Party B.

6.       NEGATIVE COVENANTS
 
         Party B covenants and agrees that, during the term of this Agreement, without the prior written consent of Party A:
 
 6.1       Equity .  Party B will not issue, purchase or redeem any equity or debt, or equity or debt securities of Party B.
 
 6.2       Encumbrances .  Party B will not create, incur, assume or suffer to exist any Encumbrance upon or with respect to any property or assets (real or personal, tangible or intangible) of Party B whether existing or hereafter acquired, provided that the provisions of this Clause 6.2 shall not prevent the creation, incurrence, assumption or existence of:
 
6.2.1        Encumbrances for taxes not yet due, or Encumbrances for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established; and
 
6.2.2        Encumbrances in respect to Party B’s property or assets imposed by law, which were incurred in the ordinary course of business, and (i) which do not in the aggregate, materially detract from the value of Party B’s property or assets or materially impair the use thereof in the operation of Party B’s business or (ii) which are being contested in good faith by appropriate proceedings and proceedings which have the effect of preventing the forfeiture or sale of the property of assets subject to any such Encumbrance.

 
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6.3       Consolidation, Merger, Sale of Assets, etc .  Party B will not wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person, except that (i) Party B may sell inventory in the ordinary course of business and (ii) Party B may sell equipment which is uneconomic or obsolete, in the ordinary course of business.
 
6.4        Dividends .  Party B will not declare or pay any dividends, or return any capital, to its shareholders or authorize or make any other distribution, payment or delivery of property or cash to its shareholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any options or warrants issued by Party B with respect to its capital stock), or set aside any funds for any of the foregoing purposes.
 
6.5        Leases .  Party B will not permit the aggregate payments (including, without limitation, any property taxes paid as additional rent or lease payments) by Party B under agreements to rent or lease any real or personal property to exceed the amount agreed by Party A in any fiscal year of Party B.
 
6.6        Indebtedness .  Party B will not contract, create, incur, assume or suffer to exist any indebtedness, except accrued expenses and current trade accounts payable incurred in the ordinary course of business, and obligations under trade letters of credit incurred by Party B in the ordinary course of business, which are to be repaid in full not more than one (1) year after the date on which such indebtedness is originally incurred to finance the purchase of goods by Party B.
 
6.7        Advances, Investment and Loans .  Party B will not lend money or grant credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, except that Party B may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms.
 
6.8        Transactions with Affiliates or Related Parties .  Party B will not enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate or Related Parties of Party B, other than on terms and conditions substantially as favorable to Party B as would be obtainable by Party B at the time in a comparable arm’s-length transaction with a Person other than an Affiliate or Related Parties and with the prior written consent of Party A. The term “Affiliate or Related Parties” shall mean the Shareholders and (a) each individual who is, or who has at any time been, an officer, director or executive employee of Party B or any Affiliate; (b) each member of the family of the Shareholders and  each of the individuals referred to in clause “(a)” above; and (c) any entity in which any one of the individuals referred to in clauses “(a)” and “(b)” above holds or held (or in which more than one of such individuals collectively hold or held), beneficially or otherwise, a controlling interest or a material voting, proprietary or equity interest.
 
 
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Consulting Services Agreement

 
 
6.9        Capital Expenditures .  Party B will not make any expenditure for fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which are capitalized in accordance with generally accepted accounting principles in the PRC and capitalized lease obligations) during any quarterly period which exceeds the aggregate the amount contained in the budget as set forth in Section 5.1.5.
 
6.10      Modifications to Debt Arrangements, Agreements or Articles of Association .  Party B will not (i) make any voluntary or optional payment or prepayment on or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) any existing Indebtedness or (ii) amend or modify, or permit the amendment or modification of, any provision of any existing Indebtedness or of any agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any of the foregoing or (iii) amend, modify or change its Articles of Association or business license, or any agreement entered into by it, with respect to its capital stock, or enter into any new agreement with respect to its capital stock.
 
6.11      Line of Business .  Party B will not engage (directly or indirectly) in any business other than those types of business prescribed within the business scope of Party B’s business license except with the prior written consent of Party A.


7.       TERM AND TERMINATION
 
7.1      This Agreement shall take effect on the date of execution of this agreement and shall remain in full force and effect for the maximum period of time permitted by law unless sooner terminated pursuant to Clause 7.2.
 
7.2      This Agreement shall remain in full force and effect for the maximum period of time permitted by law. The phrase “maximum period of time permitted by law” shall mean the time period from the execution date of this agreement to the last date of Party B’s operation term set forth in its business license. If Party B’s operation term is extendible, Party B shall use its best efforts to renew its business license and extend its operation term until and unless otherwise instructed in Party A’s prior written notice. When Party B’s operation term is extended, such time period shall be automatically extended to the last date of Party B’s extended operation term as set forth in its new business license. Notwithstanding the foregoing stipulation, Party A shall have the right to terminate this Agreement at any time by giving a thirty (30) day prior written notice to other Parties. During the effective term of this Agreement, any Party except Party A shall have no right to terminate this Agreement.
 
 
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7.3       Party A shall have no liability to the other Party for indemnity, compensation or damages arising solely from the exercise of such termination right when Party A elects to terminate this Agreement pursuant to Clause 7.2.     The expiration or termination of this Agreement shall not affect the continuing liability of Party B to pay any Consulting Services Fees already accrued or due and payable to Party A.  Upon expiration or termination of this Agreement, all amounts then due and unpaid to Party A by Party B hereunder, as well as all other amounts accrued but not yet payable to Party A by Party B, shall hereby become due and payable by Party B to Party A.
 
8.       PARTY A’S REMEDY UPON PARTY B’S BREACH
 
         In addition to the remedies provided elsewhere under this Agreement, Party A shall be entitled to remedies permitted under PRC laws, including, without limitation, compensation for any direct and indirect losses arising from the breach and legal fees incurred to recover losses from such breach.

9.       AGENCY
 
        The Parties are independent contractors, and nothing in this Agreement shall be construed to constitute either Party to be the agent, partner, legal representative, attorney or employee of the other for any purpose whatsoever.  Neither Party shall have the power or authority to bind the other except as specifically set out in this Agreement.

10.     GOVERNING LAW AND JURISDICTION
 
10.1      Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the PRC.
 
10.2      Arbitration .  Any dispute arising from, out of or in connection with this Agreement shall be settled through amicable negotiations between the Parties.  Such negotiations shall begin immediately after one Party has delivered to the other Party a written request for such negotiation.  If, within ninety (90) days following the date of such notice, the dispute cannot be settled through negotiations, the dispute shall, upon the request of either Party with notice to the other Party, be submitted to arbitration in China under the auspices of China International Economic and Trade Arbitration Commission (the “ CIETAC ”).  The Parties shall jointly appoint a qualified interpreter for the arbitration proceeding and shall be responsible for sharing in equal portions the expenses incurred by such appointment.  The arbitration proceeding shall take place in Shanghai, China.  The outcome of the arbitration shall be final and binding and enforceable upon the Parties.
 
 
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10.3      Arbitration Language and Rules .  Unless otherwise provided by the arbitration rules of CIETAC, the arbitration proceeding shall be conducted in Chinese. The arbitration tribunal shall be formed pursuant to the arbitration rules of CIETAC. Party B, Party C and Party D shall be deemed as one party in arbitration proceedings for purpose of the arbitration under this agreement. The arbitration tribunal shall apply the arbitration rules of the CIETAC in effect on the date of execution of this Agreement.  However, if such rules are in conflict with the provisions of this clause, or with Section 10 of this Agreement, then the terms of Section 10 of this Agreement shall prevail.
 
10.2.3       Cooperation; Disclosure . Each Party shall cooperate with the other Party in making full disclosure of and providing complete access to all information and documents requested by the other Party in connection with such proceedings, subject only to any confidentiality obligations binding on such Parties.
 
10.2.4       Jurisdiction . Judgment rendered by the arbitration may be entered into by any court having jurisdiction, or application may be made to such court for a judicial recognition of the judgment or any order of enforcement thereof.

10.3      Cooperation; Disclosure . Each Party shall cooperate with the other Party in making full disclosure of and providing complete access to all information and documents requested by the other Party in connection with such proceedings, subject only to any confidentiality obligations binding on such Parties.
 
10.4      Continuing Obligations . The Parties shall continue their implementation of this Agreement during the period when the relevant dispute is being resolved.

11.     ASSIGNMENT
 
  No part of this Agreement shall be assigned or transferred by either Party without the prior written consent of the other Party.  Any such assignment or transfer shall be void, provided that Party A may assign its rights and obligations under this Agreement to an Affiliate without Party B’s consent.

 
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Consulting Services Agreement

 
 
12.     NOTICES
 
 Notices or other communications required to be given by any Party pursuant to this Agreement shall be written in English and Chinese and delivered personally or sent by registered mail or prepaid mail or by a recognized courier service or by facsimile transmission to the address of relevant each Party or both Parties set forth below or other address of the Party or of the other addressees specified by such Party from time to time. The date when the notice is deemed to be duly served shall be determined as the follows: (a) a notice delivered personally is deemed duly served upon the delivery; (b) a notice sent by mail is deemed duly served the tenth (10 th ) day after the date, or the fourth (4 th ) day after the delivery date of an internationally recognized courier service; and (c) a notice sent by facsimile transmission is deemed duly served upon the time shown on the transmission confirmation of relevant documents.
 
       
 
Party A
Zhejiang Jiuxin Investment Management Co., Ltd.
 
   
Address: Room 101, No. 9-3 Da Guan Nan Si Yuan, Gongshu District, Hangzhou City, Zhejiang Province, China
 
   
Attn:  LIU Lei
 
   
Fax: +86-571-88233598
 
   
Tel: +86-571-88078153
 
     
 
Party B:
Zhejiang Jiuying Grand Pharmacy Co., Ltd.
 
   
Address: No.51, Jiajia Lane, Xiaohe Street, Gongshu District, Hangzhou City, Zhejiang Province, China
 
   
Attn: LIU Lei
 
   
Fax: +86-571-88233598
 
   
Tel: +86-571-88078276
 

13.     GENERAL

 
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Consulting Services Agreement

 
 
13.1     The failure or delay in exercising a right or remedy under this Agreement shall not be constituted as a waiver of the right or remedy, and no single or partial exercise of any right or remedy under this Agreement shall prevent any further exercise of the right or remedy.
 
13.2     Should any clause or any part of any clause contained in this Agreement be declared invalid or unenforceable for any reason whatsoever, all other clauses or parts of clauses contained in this Agreement shall remain in full force and effect.
 
13.3     This Agreement constitutes the entire agreement between the Parties relating to the subject matter of this Agreement and supersedes all previous agreements.
 
13.4     No amendment or variation of this Agreement shall be valid unless it is in writing and executed by the Parties or their authorized representatives.
 
13.5     This Agreement shall be executed in seven (7) original copies in both English and Chinese. Each Party shall receive one (1) duplicate original, and all originals shall be equally valid.

[SIGNATURE PAGE FOLLOWS]
 
 
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Consulting Services Agreement

 
 
SIGNATURE PAGES

IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives.
                        
PARTY A:
Zhejiang Jiuxin Investment Management Co., Ltd.
 
Legal/Authorized Representative: /s/ LIU Lei                
Name:  LIU Lei
Title:    Executive Director
 
PARTY B:
Zhejiang Jiuying Grand Pharmacy Co., Ltd.
 
Legal/Authorized Representative: /s/ LIU Lei                
Name:   LIU Lei
Title:     Executive Director

 
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Consulting Services Agreement

 

Appendix 1: List of Consulting and Services

1.  
Assistance of design, research and development of new products for Party B;
 
 
2.  
Permission of use of computer software of Party A;
 
 
3.  
Permission of use of know-how technology of Party A;
 
 
4.  
Daily management, maintenance and update of database of customers and suppliers of Party B;
 
 
5.  
Vocational training for the technicians of Party B;
 
 
6.  
Assistance of collection and study of relevant marketing and technical information for Party B;
 
 
7.  
Assistance of idea creation regarding marketing promotion for Party B;
 
 
8.  
Other relevant consulting and services as required by Party B from time to time.
 
 
 
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Consulting Services Agreement
 
 
 
Exhibit 10.2

OPERATING AGREEMENT
 

This Operating Agreement (this “ Ag reement”) is dated May 15, 2012, and is entered into in Hangzhou City, People’s Republic of China (“PRC” or “China”) by and among Zhejiang Jiuxin Investment Management Co., Ltd (“Party A”) and Zhejiang Jiuying Grand Pharmacy Co., Ltd.  (“Party B”), the individual shareholders collectively holding 51% of the issued and outstanding equity interests of Party B (i.e. LIU Lei, JIN Chong’an and QI Li, each as a “Individual Shareholder” and collectively as “Party C”), and Zhejiang Shouantang Medical Technology Co., Ltd (“Party D”).  Party A, Party B, Party C and Party D are each referred to in this Agreement as a “Party” and collectively as the “Parties.” Party D is made a party hereto for the sole purpose of acknowledging this Agreement.

RECITALS

1.           Party A, a company incorporated in the PRC as a foreign invested enterprise, specializes in enterprise management and consultation;

2.           Party B is engaged in retail of prescription and non-prescription drugs including traditional Chinese medicinal materials, Chinese prepared medicines, cut crude drugs, pharmaceutical chemicals, antibiotics, biochemical drugs, and biological products; retail of pre-packaged food and dairy products (including  milk-based powdered infant formulas)  and retail of general merchandise (collectively the “ Business ”);

3.           Party A owns 10% of the equity interests of Party B;

4.           Party C collectively own 51% of the equity interests of Party B, in which LIU Lei holds 19.89% of the equity interests of Party B, JIN Chong’an holds 15.81% of the equity interests of Party B and QI Li holds 15.3% of the interests of Party B.;
 
5.           Party D owns 39% of the equity interests of Party B;

6.           Party A has established a business relationship with Party B pursuant to that certain Consulting Services Agreement dated May 15, 2012 (hereinafter “ Consulting Services Agreement ”);

 
 

 
 
7.           Pursuant to that certain Consulting Services Agreement, Party B is obligated to make regular payments of consulting services fee to Party A during the term of the Consulting Services Agreement.  However, no payment has yet been made, and Party B’s daily operation has a material effect on its ability to make such payments to Party A; and

8.           The Parties are entering into this Agreement to clarify certain matters in connection with Party B’s operations in order to ensure Party B’s ability to meet its obligations under the Consulting Services Agreement, including payment of consulting services fee.

NOW THEREFORE, all Parties of this Agreement hereby agree as follows through negotiations:

1.           Party A agrees, subject to Party B’s agreement to relevant provisions of this Agreement, to be Party B’s guarantor in connection with the contracts, agreements and transactions executed between Party B and any third party, and to provide full guarantee for the performance of such contracts, agreements or transactions by Party B.  Party B agrees, as a counter-guarantee, to pledge all of its relevant assets, including accounts receivable, to Party A.  Pursuant to such guarantee arrangement, Party A may, pursuant to Section 5, enter into written guarantee agreements with Party B’s counter-parties to assume guarantor liability, upon which Party B and Party C shall take all necessary actions (including, but not limited to, executing relevant documents and commencing relevant registrations) to carry out the counter-guarantee arrangements to be provided to Party A.

2.           In consideration of Section 1 herein and to ensure the performance of the various arrangements between Party A and Party B, including related payment obligations of Party B to Party A, Party B and Party C hereby jointly agree that Party B shall not, without the prior written consent of Party A, conduct any transactions which may materially affect the assets, obligations, rights or the operations of Party B (excluding proceeding with Party B’s normal business operation and the lien obtained by relevant counter parties due to such proceedings).  Such transactions shall include, without limitation the following:
 
              2.1           To borrow money from any third party or assume any debt;
 
              2.2           To sell or acquire from any third party any asset or right, including, but not limited to, any intellectual property rights;

 
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Operating Agreement

 
 
              2.3           To provide any guarantees to any third parties using its assets or intellectual property rights; or

              2.4           To assign to any third party its business agreements.

3.           In order to further ensure Party B’s performance of the various arrangements between Party A and Party B, including related payment obligations of Party B to Party A, Party B and Party C hereby jointly agree to accept the corporate policies provided by Party A in connection with Party B’s daily operations, financial management and the employment and dismissal of Party B’s employees.

4.           Party B and Party C hereby jointly agree that Party C shall appoint such individuals as recommended by Party A to be Directors of Party B, and shall appoint members of Party A’s senior management as Party B’s General Manager, Chief Financial Officer, and other senior officers.  If any member of such senior management leaves or is dismissed by Party A, he or she will lose the qualification to take any other position with Party B, and Party B shall appoint another member of Party A’s senior management as recommended by Party A to take such position.  The person recommended by Party A in accordance with this section shall have the qualifications necessary to be a Director, General Manager, Chief Financial Officer, and/or other relevant senior officers pursuant to applicable laws.

5.           Party B and Party C, hereby jointly agree and confirm that Party B shall first seek guarantee from Party A if Party B requires any guarantee for its performance of any contract or loan in the course of its business operation.  Under such circumstances, Party A shall have the right, but not the obligation, to provide the appropriate guarantee to Party B at its sole discretion.  If Party A decides not to provide such guarantee, Party A shall issue a written notice to Party B immediately and Party B shall seek a guarantee from other third party.

6.           In the event that any of the agreements between Party A and Party B terminates or expires, Party A shall have the right, but not the obligation, to terminate all agreements between Party A and Party B, including, but not limited to, the Consulting Services Agreement.

7.           Any amendment to this Agreement shall be made in writing.  The amendments duly executed by all Parties shall be deemed as a part of this Agreement and shall have the same legal effect as this Agreement.

 
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Operating Agreement

 

8.           If any provision or provisions of this Agreement shall be held to be invalid, illegal, unenforceable or in conflict with the laws and regulations of the jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

9.           Party B and Party C shall not assign its rights and obligations under this Agreement to any third party without the prior written consent of Party A.  Party B and Party C hereby agree that Party A may assign its rights and obligations under this Agreement if necessary and such transfer shall only be subject to a written notice sent to Party B and Party C by Party A, and no any further consent from Party B or Party C will be required.

10.         The Parties hereby acknowledge and ensure the confidentiality of all oral and written materials exchanged relating to this Agreement.  No Party shall disclose the confidential information to any other third party without the other Party’s prior written approval, unless: (a) it was in the public domain at the time it was communicated (unless it entered the public domain without the authorization of the disclosing Party); (b) the disclosure was in response to the relevant laws, regulations, or stock exchange rules; or (c) the disclosure was required by any of the Party’s legal counsel or financial consultant for the purpose of the transaction of this Agreement.  However, such legal counsel and/or financial consultant shall also comply with the confidentiality as stated hereof.  The disclosure of confidential information by employees or hired institutions of any Party is deemed to be an act of such Party, and such Party shall bear all liabilities of the breach of confidentiality.  If any provision of this Agreement is found by a proper authority to be unenforceable or invalid, such unenforceability or invalidity shall not render this Agreement unenforceable or invalid as a whole.

11.         This Agreement shall be governed and construed in accordance with PRC law.

12.          Arbitration .  Any dispute arising from, out of or in connection with this Agreement shall be settled through amicable negotiations between the Parties.  Such negotiations shall begin immediately after one Party has delivered to the other Party a written request for such negotiation.  If, within ninety (90) days following the date of such notice, the dispute cannot be settled through negotiations, the dispute shall, upon the request of either Party with notice to the other Party, be submitted to arbitration in China under the auspices of China International Economic and Trade Arbitration Commission (the “ CIETAC ”).  The Parties shall jointly appoint a qualified interpreter for the arbitration proceeding and shall be responsible for sharing in equal portions the expenses incurred by such appointment.  The arbitration proceeding shall take place in Shanghai, China.  The outcome of the arbitration shall be final and binding and enforceable upon the Parties.

 
-4-
Operating Agreement

 

 
              12.1            Arbitration Language and Rules .  Unless otherwise provided by the arbitration rules of CIETAC, the arbitration proceeding shall be conducted in English. The arbitration tribunal shall be formed pursuant to the arbitration rules of CIETAC. Party B, Party C and Party D shall be deemed as one party in arbitration proceedings for purpose of the arbitration under this Agreement. The arbitration tribunal shall apply the arbitration rules of the CIETAC in effect on the date of execution of this Agreement.  However, if such rules are in conflict with the provisions of this clause, or with Section 12 of this Agreement, then the terms of Section 12 of this Agreement shall prevail.

              12.2            Cooperation; Disclosure . Each Party shall cooperate with the other Party in making full disclosure of and providing complete access to all information and documents requested by the other Party in connection with such proceedings, subject only to any confidentiality obligations binding on such Parties.

              12.3            Jurisdiction . Judgment or award rendered by the arbitration may be entered into by any court having jurisdiction, or application may be made to such court for a judicial recognition of the judgment or any order of enforcement thereof.

13.         This Agreement shall be executed by a duly authorized representative of each Party as of the date first written above and becomes effective simultaneously.

14.         The Parties confirm that this Agreement shall constitute the entire agreement of the Parties with respect to the subject matters therein and supersedes and replaces all prior or contemporaneous verbal and written agreements and understandings.

15.          TERM AND TERMINATION

              15.1           This Agreement shall take effect on the date of execution of this agreement and shall remain in full force and effect for the maximum period of time permitted by law unless sooner terminated pursuant to Clause 15.2.
 
              15.2           This Agreement shall remain in full force and effect for the maximum period of time permitted by law. The phrase “maximum period of time permitted by law” shall mean the time period from the execution date of this agreement to the last date of Party B’s operation term set forth in its business license. If Party B’s operation term is extendible, Party B shall use its best efforts to renew its business license and extend its operation term until and unless otherwise instructed in Party A’s prior written notice. When Party B’s operation term is extended, such time period shall be automatically extended to the last date of Party B’s extended operation term as set forth in its new business license. Notwithstanding the foregoing stipulation, Party A shall have the right to terminate this Agreement at any time by giving a thirty (30) day prior written notice to other Parties. During the effective term of this Agreement, any Party except Party A shall have no right to terminate this Agreement.

 
-5-
Operating Agreement

 
 
              15.3           Party A shall have no liability to the other Party for indemnity, compensation or damages arising solely from the exercise of such termination right when Party A elects to terminate this Agreement pursuant to Clause 15.2.  The expiration or termination of this Agreement shall not affect the continuing liability of Party B to pay any Consulting Services Fees already accrued or due and payable to Party A.  Upon expiration or termination of this Agreement, all amounts then due and unpaid to Party A by Party B hereunder, as well as all other amounts accrued but not yet payable to Party A by Party B, shall hereby become due and payable by Party B to Party A.

16.         This Agreement has been executed in seven (7) duplicate originals in both English and Chinese.  Each Party has received one (1) original, and all originals shall be equally valid.

[SIGNATURE PAGE FOLLOWS]
 
 
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Operating Agreement

 
 
[SIGNATURE PAGE]

IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives.

PARTY A:
Zhejiang Jiuxin Investment Management Co., Ltd.
 
Legal/Authorized Representative: /s/ LIU Lei                
Name:  LIU Lei
Title:    Executive Director
 
PARTY B:
Zhejiang Jiuying Grand Pharmacy Co., Ltd.
 
Legal/Authorized Representative: /s/ LIU Lei                
Name:  LIU Lei
Title:    Executive Director
 
 
-7-
Operating Agreement

 
 
SIGNATURE PAGE FOR PARTY C

 
Party C.
 
 
/s/ LIU Lei                           
LIU Lei

Owns 19.89% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330107196310260910



/s/ JIN Chong’an                
JIN Chong’an

Owns 15.81% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 440102196306183258



/s/ QI Li                                
QI Li

Owns 15.3% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330106197205090081
 
 
-8-
Operating Agreement

 
 
SIGNATURE PAGE FOR PARTY D


Zhejiang Shouantang Medical Technology Co., Ltd.
Owns 39% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.


Legal/Authorized Representative: /s/ LIU Lei                                   
Name:  LIU Lei
Title:    Executive Director
 
-9-
Operating Agreement

Exhibit 10.3

VOTING RIGHTS PROXY AGREEMENT

This Voting Rights Proxy Agreement (the “ Agreement ”) is entered into in Hangzhou, People’s Republic of China (“ PRC ” or “ China ”) as of May 15, 2012 by and among Zhejiang Jiuxin Investment Management Co., Ltd (“ Party A ”) and Zhejiang Jiuying Grand Pharmacy Co., Ltd. (“Company” or “Party B”), the individual shareholders collectively holding 51% of the issued and outstanding equity interests of Party B (i.e. LIU Lei, JIN Chong’an and QI Li, each as a “Individual Shareholder” and collectively as “Party C”), and Zhejiang Shouantang Medical Technology Co., Ltd (“Party D”).  Party A, Party B, Party C and Party D are each referred to in this Agreement as a “ Party ” and collectively as the “ Parties ”. Party D is made a party hereto for the sole purpose of acknowledging this Agreement.

RECITALS
 
1.           Party A, a company incorporated in the PRC as a foreign invested enterprise, specializes in enterprise management and consultation (collectively the “Business”). Party A and the Company have entered into a certain Consulting Services Agreement dated May 15, 2012 (the “Consulting Services Agreement”) in connection with the Business.

2.           The Company is mainly engaged in retail of prescription and non-prescription drugs including traditional Chinese medicinal materials, Chinese prepared medicines, cut crude drugs, pharmaceutical chemicals, antibiotics, biochemical drugs, and biological products; retail of pre-packaged food and dairy products (including milk-based powdered infant formulas)  and retail of general merchandise

3.           Party C” are individual shareholders of Company, each legally holding such amount of equity interest of Company as set forth on the signature page of this Agreement and collectively holding 51% of the issued and outstanding equity interests of Company (collectively the “ 51% Equity Interest ”).

4.           Party C desire to grant to Party A a proxy to vote the 51% Equity Interest for the maximum period of time permitted by law in consideration of good and valuable consideration, the receipt of which is hereby acknowledged and agreed by Party A.

NOW THEREFORE , the Parties agree as follows:

 
 

 
 
1.           Party C hereby agree to irrevocably grant and entrust Party A and the person designated by Party A, for the maximum period of time permitted by law, with all of following rights:

 
(1)
As the agent of Party C, propose for or present the shareholder meeting in accordance with the valid Articles of Association thereof;
 
 
(2)
Represent Party C to exercise the voting rights on the decision matter at the shareholder meeting, which is including but not limited to: designating and electing the director, general manager or other senior officers who shall be appointed or removed by Party C;
 
 
(3)
Other voting rights which shall be entitled to Party C as the shareholder of a company under PRC Laws and Regulations (including any amendment, modification, supplemental or revised version of PRC Laws and Regulations, and no matter whether such laws or regulations become effective before or after the execution of this Agreement);

 
(4)
Other voting rights for the shareholder under the valid Articles of Association thereof (including any other shareholder’s voting right under the Articles of Association as it may be amended from time to time).

2.           Party A may establish and amend rules to govern how Party A shall exercise the powers granted by Party C herein, including, but not limited to, the number or percentage of directors of Party A which shall be required to authorize the exercise of the voting rights granted by Party C, and Party A shall only proceed in accordance with such rules.

3.           Party C shall not transfer or cause to be transferred the 51% Equity Interest to any party (other than Party A or such designee of Party A) in whole or in part.  Each Individual Shareholder acknowledges that it will continue to perform its obligations under this Agreement even if one or more of other shareholders of the Company no longer hold any part of the equity interest of the Company.

4.           This Agreement has been duly executed by the Parties as of the date first set forth above, and in the event that a Party is not a natural person, then such Party’s action has been duly authorized by all necessary corporate or other action and executed and delivered by such Party’s duly authorized representatives.  This Agreement shall take effect upon the execution of this Agreement.

 
-2-
Proxy Agreement

 

5.           Each Individual Shareholder represents and warrants to Party A that such Individual Shareholder owns such amount of the equity interest of the Company as set forth next to its name on the signature page below, free and clear of all liens and encumbrances, and such Individual Shareholder has not granted to any party, other than Party A, a power of attorney or proxy over any of such amount of the 51% Equity Interest or any of shareholder’s rights as a shareholder of Company.  Each Individual Shareholder further represents and warrants that the execution and delivery of this Agreement by such Individual Shareholder shall not violate any law, regulations, judicial or administrative order, arbitration award, agreement, contract or covenant applicable to such Individual Shareholder.

6.            TERM AND TERMINATION
 
              6.1           This Agreement shall take effect on the date of execution of this agreement and shall remain in full force and effect for the maximum period of time permitted by law unless sooner terminated pursuant to Clause 6.2.

              6.2           This Agreement shall remain in full force and effect for the maximum period of time permitted by law. The phrase “maximum period of time permitted by law” shall mean the time period from the execution date of this agreement to the last date of Party B’s operation term set forth in its business license. If Party B’s operation term is extendible, Party B shall use its best efforts to renew its business license and extend its operation term until and unless otherwise instructed in Party A’s prior written notice. When Party B’s operation term is extended, such time period shall be automatically extended to the last date of Party B’s extended operation term as set forth in its new business license. Notwithstanding the foregoing stipulation, Party A shall have the right to terminate this Agreement at any time by giving a thirty (30) day prior written notice to other Parties. During the effective term of this Agreement, any Party except Party A shall have no right to terminate this Agreement.

              6.3           Party A shall have no liability to the other Party for indemnity, compensation or damages arising solely from the exercise of such termination right when Party A elects to terminate this Agreement pursuant to Clause 6.2.  The expiration or termination of this Agreement shall not affect the continuing liability of Party B to pay any Consulting Services Fees already accrued or due and payable to Party A.  Upon expiration or termination of this Agreement, all amounts then due and unpaid to Party A by Party B hereunder, as well as all other amounts accrued but not yet payable to Party A by Party B, shall hereby become due and payable by Party B to Party A.

7.           Any amendment to and/or rescission of this Agreement shall be in writing by the Parties.

 
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Proxy Agreement

 

8.           The execution, validity, creation and performance of this Agreement shall be governed by the laws of PRC.

9.           This Agreement shall be executed in seven (7) duplicate originals in both English and Chinese, and each Party shall receive one (1) duplicate original, each of which shall be equally valid.

10.          Arbitration .  Any dispute arising from, out of or in connection with this Agreement shall be settled through amicable negotiations between the Parties.  Such negotiations shall begin immediately after one Party has delivered to the other Party a written request for such negotiation.  If, within ninety (90) days following the date of such notice, the dispute cannot be settled through negotiations, the dispute shall, upon the request of either Party with notice to the other Party, be submitted to arbitration in China under the auspices of China International Economic and Trade Arbitration Commission (the “ CIETAC ”).  The Parties shall jointly appoint a qualified interpreter for the arbitration proceeding and shall be responsible for sharing in equal portions the expenses incurred by such appointment.  The arbitration proceeding shall take place in Shanghai, China.  The outcome of the arbitration shall be final and binding and enforceable upon the Parties.

              10.1          Arbitration Language and Rules .  Unless otherwise provided by the arbitration rules of CIETAC, the arbitration proceeding shall be conducted in English. The arbitration tribunal shall be formed pursuant to the arbitration rules of CIETAC. Party B, Party C and Party D shall be deemed as one party in arbitration proceedings for purpose of the arbitration under this Agreement. The arbitration tribunal shall apply the arbitration rules of the CIETAC in effect on the date of execution of this Agreement.  However, if such rules are in conflict with the provisions of this clause, or with Section 12 of this Agreement, then the terms of Section 12 of this Agreement shall prevail.
 
              10.2          Cooperation; Disclosure . Each Party shall cooperate with the other Party in making full disclosure of and providing complete access to all information and documents requested by the other Party in connection with such proceedings, subject only to any confidentiality obligations binding on such Parties.
 
              10.3          Jurisdiction . Judgment or award rendered by the arbitration may be entered into by any court having jurisdiction, or application may be made to such court for a judicial recognition of the judgment or any order of enforcement thereof.
 
[SIGNATURE PAGE FOLLOWS]
 
 
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Proxy Agreement

 

 
[SIGNATURE PAGE]

IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives.
 
PARTY A: Zhejiang Jiuxin Investment Management Co., Ltd.
   
   
  Legal/Authorized Representative: /s/ LIU Lei
  Name:  LIU Lei
  Title:    Executive Director
 
 
-5-
Proxy Agreement

 

 

SIGNATURE PAGE FOR PARTY B
 
PARTY B/ COMPANY : Zhejiang Jiuying Grand Pharmacy Co., Ltd.
   
  Legal/Authorized Representative: /s/ LIU Lei
 
Name:  LIU Lei
 
Title:    Executive Director
 
 
-6-
Proxy Agreement

 
 
SIGNATURE PAGE FOR PARTY C

 
Party C.
 
 
/s/ LIU Lei
LIU Lei

Owns 19.89% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330107196310260910


/s/ JIN Chong’an
JIN Chong’an

Owns 15.81% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 440102196306183258


/s/ QI Li
QI Li

Owns 15.3% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330106197205090081
 
 
-7-
Proxy Agreement

 
 
SIGNATURE PAGE FOR PARTY D


ACKNOWLEDGED BY:

Zhejiang Shouantang Medical Technology Co., Ltd.
Owns 39% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.


Legal/Authorized Representative: /s/ LIU Lei
Name:  LIU Lei
Title: Executive Director

-8-
Proxy Agreement

Exhibit 10.4

EQUITY PLEDGE AGREEMENT

This Equity Pledge Agreement (hereinafter this “ Agreement ”) is dated May 15, 2012, and is entered into in Hangzhou City, People’s Republic of China (“ PRC ” or “ China ”) by and among Zhejiang Jiuxin Investment Management Co., Ltd (“Party A” or “ Pledgee ”), Zhejiang Jiuying Grand Pharmacy Co., Ltd.  (“Party B” or “ Company ”), each of the individual shareholders listed on the signature pages hereto (i.e. LIU Lei, JIN Chong’an and QI Li, each a “ Pledgor ” and collectively, “Party C” or the “ Pledgors ”) of the Company, and Zhejiang Shouantang Medical Technology Co., Ltd (“Party D”).  Party A, Party B, Party C and Party D are each referred to in this Agreement as a “ Party ” and collectively as the “ Parties ”. Party D is made a party hereto for the sole purpose of acknowledging this Agreement.

RECITALS

1.     The Pledgee incorporated in the PRC as a foreign invested enterprise and specializes in enterprise management and consultation.

2.     The Company is engaged in retail of prescription and non-prescription drugs including traditional Chinese medicinal materials, Chinese prepared medicines, cut crude drugs, pharmaceutical chemicals, antibiotics, biochemical drugs, and biological products; retail of pre-packaged food and dairy products (including  milk-based powdered infant formulas)  and retail of general merchandise (collectively the “ Business ”).

3.     The Pledgors are individual shareholders of the Company, each legally holding such amount of equity interest of the Company as set forth on the signature page of this Agreement and collectively holding 51% of the issued and outstanding equity interests of the Company (collectively the “ Pledged Equity Interest ”).

4.     The Pledgee and the Company have executed a Consulting Services Agreement (the “Consulting Services Agreement”) concurrently herewith, pursuant to which the Company shall pay consulting and service fees (the “ Consulting Services Fee ”) to the Pledgee for consulting and related services in connection with the Business.

5.     In order to ensure that the Company will perform its obligations under the Consulting Services Agreement, and in order to provide an additional mechanism for the Pledgee to enforce its rights to collect the Consulting Services Fee from the Company, the Pledgors agree to pledge all their equity interests in the Company as security for the performance of the obligations of the Company under the Consulting Services Agreement, including payment of the Consulting Services Fee.
 
 
 

 
 
NOW THEREFORE , the Pledgee and the Pledgors through mutual negotiations hereby enter into this Agreement based upon the following terms:

1.     Definitions and Interpretation .  Unless otherwise provided in this Agreement, the following terms shall have the following meanings:

1.1           “ Pledge ” refers to the full content of Section 2 hereunder.
 
1.2           “ Pledged Equity Interest ” refers to total 51% of the equity interests in the Company legally held by the Pledgors in aggretation.

1.3           “ Term of Pledge ” refers to the period provided for under Section 3.2 hereunder.

1.4           “ Event of Default ” refers to any event in accordance with Section 7.1 hereunder.

1.5           “ Notice of Default ” refers to the notice of default issued by the Pledgee in accordance with this Agreement.

2.            The Pledge .  The Pledgors hereby pledge 51% of the equity interests of the Company collectively held by the Pledgors to the Pledgee as a security for the obligations of the Company under the Consulting Services Agreement (the “ Pledge ”).  Pursuant thereto, the Pledgee shall have priority in receiving payments from the evaluation or the proceeds from the auction or sale of the Pledged Equity Interest. The Pledged Equity Interest shall hereinafter be referred to as the “ Pledged Collateral ”.
 
3.            Term of Pledge .

3.1           The Pledge shall take effect as of the date when the Pledge is recorded in the Administration of Industry and Commerce, and shall expire two (2) years from the Company’s satisfaction of all its obligations under the Consulting Services Agreement (the “ Term ”).

 
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Equity Pledge Agreement

 
 
3.2           During the Term, the Pledgee shall be entitled to vote, control, sell, or dispose of the Pledged Collateral in accordance with this Agreement in the event that Company does not perform its obligations under the Consulting Services Agreement, including without limitations thee failures to pay the Consulting Service Fee.

3.3           During the Term, the Pledgee shall be entitled to collect any and all dividends declared or paid in connection with the Pledged Collateral.

3.4          This Equity Pledge Agreement shall take effect as of the date when this Agreement is duly executed; the effectiveness and performance of this Agreement will not be affected by the pledge registration specified under Section 4 herein. This Agreement shall be in full force and effective until two (2) years from the Company’s satisfaction of all its obligations under the Consulting Services Agreement.

4.            Pledge Procedure and Registration .

4.1           The Pledgors shall be responsible for recording of this Agreement in the Company’s Register of Shareholders at the date of execution of this Agreement.  The Pledgors shall process the registration procedures with the Administration for Industry and Commerce concerning the Pledge as soon as practical after the execution of this Agreement.

4.2           To the maximum   extent permitted by the PRC laws, the Pledgors and Pledgee will file the application with Administration for Industry and Commerce with competent authority to register the term of the Pledge under this Agreement.
 
4.3           Pledgors and Pledgee agree to use their best efforts to take any action required for the completion of the registration of the Pledge, including without limitation, the execution of documents, the payment of filing fees and submission of applications.

5.            Representation and Warranties of Pledgors .

5.1           The Pledgors are the legal owners of the Pledged Collateral.

5.2           Other than to the Pledgee, the Pledgors have not pledged the Pledged Collateral to any other party, and the Pledged Collateral is not encumbered to any other party.
 
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Equity Pledge Agreement

 
 
6.            Covenants of Pledgors and the Company .

6.1           During the Term, the Pledgors represent and warrant to the Pledgee for the Pledgee’s benefit that the Pledgors shall:

6.1.1     Not transfer or assign the Pledged Collateral, nor create or permit to create any new pledge or encumbrance to the Pledged Collateral which may adversely affect the rights and/or benefits of the Pledgee without the Pledgee’s prior written consent. Furthermore, without the Pledgee’s prior written consent, the Company would not assist or allow the Pledgor to transfer the Pledged Collateral or create any new pledge or encumbrance on the Pledged Collateral.
 
The Pledgors shall not alter their respective equity interest ratio in the Company. None of the Pledgors is allowed to transfer his/her/its equity interest in the Company. The Pledgors and the Company shall use their best efforts to extend the operation term of the Company until and unless otherwise instructed in the Pledgee’s prior written notice.

6.1.2     Comply with the laws and regulations with respect to the Pledge; present to Pledgee any notices, orders or advisements with respect to the Pledge that may be issued or made by a competent PRC authority within five (5) days upon receiving such notices, orders or advisements; comply with such notices, orders or advisements; or object to the foregoing matters upon the reasonable request of the Pledgee or with consent from the Pledgee.

6.1.3     Timely notify the Pledgee of any events which may affect the Pledged Collateral or the Pledgors’ rights thereto, or which may change any of the Pledgors’ warranties or affect the Pledgor’s performance of their obligations under this Agreement.

6.2     The Pledgors agree that the Pledgee’s right to the Pledge pursuant to this Agreement shall not be suspended or inhibited by any legal proceedings initiated by the Pledgors, jointly or separately, or by any successor of or any person authorized by the Pledgors.

6.3     In order to protect and perfect the security for the payment of the Consulting Services Fee, the Company and the Pledgors shall execute in good faith and cause other parties who have interests in the Pledged Collateral to execute all the title certificates, contracts, resolutions, and perform actions and cause other parties who have interests to take action, as required by the Pledgee.
 
 
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Equity Pledge Agreement

 

6.4     The Pledgors represent and warrant to the Pledgee or its appointed representative (whether a natural person or a legal entity) that they will execute all applicable and required amendments in connection with the registration of the Pledge, and within a reasonable amount of time upon request, provide the relevant notice, order and decision regarding such registration to the Pledgee.

6.5     The Pledgors represent and warrant to the Pledgee that they will abide by and perform all relevant guarantees, covenants, warranties, representations and conditions necessary to insure the rights of the Pledgee under this Agreement.  The Pledgors shall compensate all the losses suffered by the Pledgee as a result of the Pledgors’ failure to perform any such guarantees, covenants, warranties, representations or conditions.

7.            Events of Default .

7.1     The occurrence of any one of the following events shall be regarded as an “ Event of Default ”:

7.1.1     This Agreement is deemed illegal by a governing authority of the PRC, or the Pledgor is incapable of continuing to perform the obligations herein due to any reason;

7.1.2     The Company fails to timely pay the Consulting Services Fee in full as required under the Consulting Service Agreement;

7.1.3     A Pledgor makes any materially false or misleading representations or warranties under Section 5 herein, or breaches any warranties under Section 5 herein;
 
7.1.4     A Pledgor breaches the covenants under Section 6 herein;
 
7.1.5     A Pledgor breaches any terms and conditions of this Agreement;
 
 
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Equity Pledge Agreement

 

7.1.6     A Pledgor transfers or assigns, cause to be transferred or assigned, or otherwise abandons the Pledged Collateral without the prior written consent of the Pledgee;

7.1.7     the Company is incapable of repaying debt;

7.1.8     The assets of a Pledgor are adversely affected so as to cause the Pledgee to believe that such Pledgor’s ability to perform the obligations herein is adversely affected;

7.1.9     The successors or agents of the Company refuse, or are only partly able, to perform the payment obligations under the Consulting Services Agreement;

7.2           A Pledgor shall immediately give a written notice to the Pledgee if such Pledgor is aware of or discovers that any event under Section 7.1 herein, or any event that may result in any one of the foregoing events, has occurred or is likely to occur.

7.3           Unless an Event of Default has been resolved to the Pledgee’s satisfaction within 15 days of its occurrence (the “ Cure Period ”), the Pledgee may, at any time thereafter, give a written default notice (the “ Default Notice ”) to the Pledgor and require the Pledgors to dispose the Pledged Collateral in accordance with Section 8 herein.

8.            Exercise of Remedies .
 
8.1            Authorized Action by Secured Party . The Pledgors hereby irrevocably appoint Pledgee as the attorney-in-fact of the Pledgors for the purpose of carrying out the security provisions of this Agreement and to take any action and execute any instrument that the Pledgee may deem necessary or advisable to accomplish the purpose of this Agreement.  Such power of attorney shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral) by any person, upon the occurrence an Event of Default.  Pledgee shall not have any duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so.

If an Event of Default occurs, or is already proceeding, Pledgee shall have the right to exercise the following rights:
 
 
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Equity Pledge Agreement

 
 
(a)        Collect by legal proceedings or otherwise, and endorse and/or receive all payments, proceeds and other sums and property now or hereafter payable on or on account of the Pledged Collateral;

(b)              Enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Pledged Collateral;

(c)              After the delivery of written notice to the Pledgor, the Pledgee shall be entitled to all the remedy rights and powers under PRC laws and basic provisions of this Agreement, which is including but not limited to: disposing the Pledged Collateral through auction or sale. The Pledgee shall not bear any loss raised from the performance of aforesaid remedy rights and powers;

(d)              Make any compromise or settlement, and take any action the Pledgee deems advisable, with respect to the Pledged Collateral;

(e)              Notify any obligor with respect to the Pledged Collateral to make payment directly to the Pledgee;

(f)              All rights of the Pledgors that they would otherwise be entitled to enjoy or exercise with respect to the Pledged Collateral, including without limitations the rights to vote and to receive distributions, shall cease without any further action by or notice, and all such rights shall thereupon become vested in the Pledgee; and

(g)              The Pledgors shall execute and deliver to the Pledgee such other instruments as the Pledgee may request in order to permit the Pledgee to exercise the rights set forth herein.

8.2            Other Remedies .  Upon the expiration of the Cure Period, the Pledgee, in addition to the remedies set forth in Section 8.1 or such other rights in law, equity or otherwise, may, without notice or demand on the Pledgors, elect any of the following:

 
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Equity Pledge Agreement

 
 
(a)              Require the Pledgors to immediately pay all outstanding unpaid amounts due under the Consulting Services Agreement;
 
(b)              Foreclose or otherwise enforce the Pledgee’s security interest to the Pledged Collateral in any manner permitted by law or provided under this Agreement;

(c)              Require the Pledgors to immediately resume the performance of this Agreement with their best efforts;

(d)              Exercise any and all rights as the beneficial and legal owner of the Pledged Collateral, including, without limitation, the transfer and exercise of voting and any other rights to the Pledged Collateral; and

(e)              Exercise any and all rights and remedies of a secured party under applicable laws.

8.3           The Pledgee has priority in the receipt of payments from the proceeds of auction or sale of the Pledged Collateral, in part or in whole, in accordance with legal procedures, until all payment obligations under the Consulting Services Agreement are satisfied.

8.4           The Pledgors shall not hinder the Pledgee from exercising its rights in accordance with this Agreement and shall give necessary assistance so that the Pledgee may exercise its rights in full.

9.            Assignment .

9.1            The Pledgors shall not assign or otherwise transfer the rights and obligations herein without the Pledgee’s prior written consent.

9.2           This Agreement shall be binding upon each of the Pledgors and their respective successors, and shall be binding on the Pledgee and each of its successor and assignee.

9.3           Upon the transfer or assignment by the Pledgee of any or all of its rights and obligations under the Consulting Service Agreement, the Pledgee’s transferee or assignee shall enjoy and undertake the same rights and obligations as the Pledgee under this Agreement.  The Pledgors shall be notified of any such transfer or assignment by written notice and at the request of the Pledgee, the Pledgors shall execute such relevant agreements and/or documents with respect to such transfer or assignment.

 
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Equity Pledge Agreement

 
 
9.4           In the event of the Pledgee’s change in control resulting in the transfer or assignment of this Agreement, the successor to the Pledgee and the Pledgors shall execute a new equity pledge agreement.


10.        Formalities, Fees and Other Charges .

10.1          The Pledgors shall be responsible for all the fees and expenses in relation to this Agreement, including, but not limited, to legal fees, cost of production, stamp tax and any other taxes and charges.  If the Pledgee pays the relevant taxes in accordance with applicable law, the Pledgors shall fully reimburse the Pledgee of such taxes.

10.2          The Pledgors shall be responsible for all expenses (including, but not limited to, any taxes, application fees, management fees, litigation costs, attorney’s fees, and various insurance premiums in connection with the disposition of the Pledge) incurred by the Pledgee in its recourse to collect from the Pledgors arising from the Pledgors’ failure to pay any relevant taxes and fees.

11.        Confidentiality . The Parties hereby acknowledge and agree to ensure the confidentiality of all oral and written materials exchanged relating to this Agreement.  No Party shall disclose any confidential information to any other third party without the other Parties’ prior written approval, unless: (a) such information was in the public domain at the time it was communicated (unless it entered the public domain without the authorization of the disclosing Party); (b) the disclosure was in response to the relevant laws, regulations, or stock exchange rules; or (c) the disclosure was required by any of the Party’s legal counsel or financial consultant for the purpose of the transaction underlying this Agreement.  However, such legal counsel and/or financial consultant shall also comply with the confidentiality as stated hereof.  The disclosure of confidential information by employees or agents of the disclosing Party is deemed to be an act of the disclosing Party, and such disclosing Party shall bear all liabilities for any breach of confidentiality.

12.        Dispute Resolution.

12.1         This Agreement shall be governed by and construed in accordance with the laws of the PRC.
 
 
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Equity Pledge Agreement

 

12.2          Arbitration .  Any dispute arising from, out of or in connection with this Agreement shall be settled through amicable negotiations between the Parties.  Such negotiations shall begin immediately after one Party has delivered to the other Party a written request for such negotiation.  If, within ninety (90) days following the date of such notice, the dispute cannot be settled through negotiations, the dispute shall, upon the request of either Party with notice to the other Party, be submitted to arbitration in China under the auspices of China International Economic and Trade Arbitration Commission (the “ CIETAC ”).  The Parties shall jointly appoint a qualified interpreter for the arbitration proceeding and shall be responsible for sharing in equal portions the expenses incurred by such appointment.  The arbitration proceeding shall take place in Shanghai, China.  The outcome of the arbitration shall be final and binding and enforceable upon the Parties.

12.2.1            Arbitration Language and Rules .  Unless otherwise provided by the arbitration rules of CIETAC, the arbitration proceeding shall be conducted in English. The arbitration tribunal shall be formed pursuant to the arbitration rules of CIETAC. Party B, Party C and Party D shall be deemed as one party in arbitration proceedings for purpose of the arbitration under this Agreement. The arbitration tribunal shall apply the arbitration rules of the CIETAC in effect on the date of execution of this Agreement.  However, if such rules are in conflict with the provisions of this clause, or with Section 12 of this Agreement, then the terms of Section 12 of this Agreement shall prevail.
12.2.2            Cooperation; Disclosure . Each Party shall cooperate with the other Party in making full disclosure of and providing complete access to all information and documents requested by the other Party in connection with such proceedings, subject only to any confidentiality obligations binding on such Parties.

12.2.3            Jurisdiction . Judgment or award rendered by the arbitration may be entered into by any court having jurisdiction, or application may be made to such court for a judicial recognition of the judgment or any order of enforcement thereof.

13.         Notices .  Any notice given by the parties hereto for the purpose of performing the rights and obligations hereunder shall be in writing.  If such notice is delivered by messenger, the time of receipt is the time when such notice is received by the addressee; if such notice is transmitted by facsimile, the time of receipt is the time when such notice is transmitted.  If the notice does not reach the addressee by the end of the business day, the following business day shall be the date of receipt.  The place of delivery is the Party’s address as set forth in the signature pages hereto or the address advised in writing including via facsimile.

14.        Entire Contract. The Parties agree that this Agreement constitutes the entire agreement of the Parties upon its effectiveness and supersedes all prior oral and/or written agreements and understandings relating to this Agreement .
 
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Equity Pledge Agreement

 
 
15.        Severability .  If any provision or provisions of this Agreement shall be held by a proper authority to be invalid, illegal, unenforceable or in conflict with the laws and regulations of the PRC, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

16.         Appendices.   The appendices to this Agreement are incorporated into and are a part of this Agreement.

17.        Amendment or Supplement .

17.1           The Parties may amend this Agreement in writing, provided that such amendment shall be duly executed and signed by the Pledgee, the Company, such Pledgors collectively holding a majority of the Pledged Equity Interests, and Party D, and such amendment shall thereupon become a part of this Agreement and shall have the same legal effect as this Agreement.

17.2           This Agreement and any amendments, modification, supplements, additions or changes hereto shall be in writing and come into effect upon being executed and stamped by the parties hereto. The registration of the Pledge under section 4 will not affect the validity and enforcement of this Agreement.

18.        Language and Copies of the Agreement.  This Agreement shall be executed in both English and Chinese in seven (7) original copies.  Each Party shall receive one (1) original copy, all of which shall be equally valid and enforceable.

 [SIGNATURE PAGE FOLLOWS]
 
 
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Equity Pledge Agreement

 
 
[SIGNATURE PAGE]

IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives as of the date first set forth above.
 
 
PARTY A/PLEDGEE:
Zhejiang Jiuxin Investment Management Co., Ltd.
 
Legal/Authorized Representative: /s/ LIU Lei
 
Name: LIU Lei
 
Title: Executive Director
 
 
   
PARTY B/COMPANY:
Zhejiang Jiuying Grand Pharmacy Co., Ltd.
  Legal/Authorized Representative: /s/ LIU Lei
 
Name: LIU Lei
 
Title: Executive Director

 
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Equity Pledge Agreement

 

PARTY C/PLEDGOR SIGNATURE PAGE

PARTY C/PLEDGORS:
 

/s/ LIU Lei
LIU Lei

Owns 19.89% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330107196310260910



/s/ JIN Chong’an
JIN Chong’an

Owns 15.81% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 440102196306183258



/s/ QI Li
QI Li

Owns 15.3% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330106197205090081
 
 
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Equity Pledge Agreement

 

SIGNATURE PAGE FOR PARTY D

Zhejiang Shouantang Medical Technology Co., Ltd.
Owns 39% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.


 
Legal/Authorized Representative: /s/ LIU Lei
Name: LIU Lei
Title: Executive Director
 
 
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Equity Pledge Agreement

 

Appendix 1


RESOLUTIONS OF THE SHAREHOLDERS
OF
ZHEJIANG JIUYING GRAND PHARMACY CO., LTD.


WHEREAS, Zhejiang Jiuying Grand Pharmacy Co., Ltd. (“Company”)   has entered into a Consulting Services Agreement with Zhejiang Jiuxin Investment Management Co., Ltd., a wholly foreign-owned enterprise under laws of China (“Pledgee”), pursuant to which the Company is obligated to pay certain fees in exchange for the Pledgee’s consultation and related services;

WHEREAS, LIU Lei holds 19.89% of the issued and outstanding equity interests of Company, JIN Chong’an holds 15.81% of the issued and outstanding equity interests of Company and QI Li holds 15.3% of the issued and outstanding equity interests of Company. LIU Lei, JIN Chong’an and QI Li collectively hold 51% of the issued and outstanding equity interests of Company (collectively the “Pledged Equity Interests”), and have decided to pledge the Pledged Equity Interest to the Pledgee pursuant to an Equity Pledge Agreement in order to secure Company’s payment obligations under the Consulting Services Agreement; and

WHEREAS, it is in the best interest of the Company and all shareholders of the Company to enter into the Pledge Agreement;

RESOLVED, that  total 51% of equity interest of the Company collectively held by  LIU Lei, JIN Chong’an and QI Li shall be pledged to the Pledgee pursuant to the Equity Pledge Agreement, the terms and conditions of which are hereby approved.


[SIGNATURE PAGE FOLLOWS]
 
 
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Equity Pledge Agreement

 
 
SIGNATURE PAGE (1 of 2) FOR SHAREHOLDERS
 

These resolutions were executed and submitted on May 15, 2012 by the undersigned shareholders collectively hold 100% of the issued and outstanding equity interests of Company:
 

SHAREHOLDERS:
 

/s/ LIU Lei
LIU Lei

Owns 19.89% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330107196310260910

 

/s/ JIN Chong’an
JIN Chong’an

Owns 15.81% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 440102196306183258
 
 

/s/ QI Li
QI Li

Owns 15.3% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330106197205090081
 
 
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Equity Pledge Agreement

 
 
SIGNATURE PAGE (2of 2) FOR SHAREHOLDERS


Zhejiang Shouantang Medical Technology Co., Ltd.
Owns 39% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
 
 
Legal/Authorized Representative: /s/ LIU Lei
Name: LIU Lei
Title: Executive Director
 
 

Zhejiang Jiuxin Investment Management Co., Ltd.
Owns 10% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.

 
Legal/Authorized Representative: /s/ LIU Lei
Name:  LIU Lei
Title: Executive Director
 
 
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Equity Pledge Agreement
Exhibit 10.5

OPTION AGREEMENT

This Option Agreement (this “Agreement”) is dated May 15, 2012, and is entered into in Hangzhou City, People’s Republic of China (“PRC” or “China”) by and among Zhejiang Jiuxin Investment Management Co., Ltd (“Party A”) and Zhejiang Jiuying Grand Pharmacy Co., Ltd. (“Company” or “Party B”), the individual shareholders collectively holding 51% of the issued and outstanding equity interests of Party B (i.e. LIU Lei, JIN Chong’an and QI Li, each as a “Individual Shareholder” and collectively as “Party C”), and Zhejiang Shouantang Medical Technology Co., Ltd (“Party D”).  Party A, Party B, Party C and Party D are each referred to in this Agreement as a “Party” and collectively as the “Parties.” Party D is made a party hereto for the sole purpose of acknowledging this Agreement.
 
RECITALS

1.              Party A, a company incorporated in the PRC as a foreign invested enterprise, specializes in enterprise management and consultation, and Party B is engaged in retail of prescription and non-prescription drugs including traditional Chinese medicinal materials, Chinese prepared medicines, cut crude drugs, pharmaceutical chemicals, antibiotics, biochemical drugs, and biological products; retail of pre-packaged food and dairy products (including  milk-based powdered infant formulas)  and retail of general merchandise (collectively the “Business”). Party A and Party B have entered into a certain Consulting Services Agreement dated May 15, 2012 (the “Consulting Services Agreement”) in connection with the Business.

2.           The Individual Shareholders (collectively the “Party C”) are shareholders of Party B legally holding such amount of equity interest of the Party B as set forth on the signature page of this Agreement and collectively holding 51% of the issued and outstanding equity interests of Party B (collectively the “Option Equity Interest ”).

3.           The Parties are entering into this Agreement in connection with the Consulting Services Agreement.

NOW, THEREFORE , the Parties to this Agreement hereby agree as follows:

1.            PURCHASE AND SALE OF OPTION EQUITY INTEREST

1.1            Grant of Rights . Party C hereby collectively and irrevocably grant to Party A or a designee of Party A (the “Designee”) an option to purchase at any time, to the extent permitted under PRC Law, all or a portion of the Option Equity Interest in accordance with such procedures as determined by Party A, at the price specified in Section 1.3 of this Agreement (the “ Option ”).  No Option shall be granted to any party other than to Party A and/or a Designee.  Party B hereby agrees to Party C’s grant of the Option to Party A and/or the Designee.  As used herein, Designee may be an individual person, a corporation, a joint venture, a partnership, an enterprise, a trust or an unincorporated organization.
 
 
 

 
 
1.2            Exercise of Rights .  According with the requirements of applicable PRC laws and regulations, Party A and/or the Designee may exercise the Option at any time by issuing a written notice (the “Notice”) to one or more of the Party C and specifying the amount of the Option Equity Interest to be purchased from Party C and the manner of purchase.
 
1.3     Purchase Price .

The purchase price of the Option Equity Interest pursuant to an exercise of the Option by Party A or the Designee shall be the lowest price permitted under PRC Laws and Regulations. When such price is higher than registered capital of the Company at the execution date hereof, calculated pro rata for purchase of less than all of the Option Equity Interest, the excessive part of the price shall belong to and be returned to Party A or the Designee in a manner as instructed by Party A. Notwithstanding the above, all Parties agree that no Party C shall receive any benefits or profits through selling an Option Equity Interest pursuant to any exercise of the Option by Party A or the Designee.

1.4            Transfer of Option Equity Interest .  Upon each exercise of the Option under this Agreement:

1.4.1           Party C shall hold or cause to be held a meeting of shareholders of Party B in order to adopt such resolutions as necessary in order to approve the transfer of the relevant Option Equity Interest (such Option Equity Interest hereinafter the “Purchased Equity Interest”) to Party A and/or the Designee;

1.4.2           The relevant Parties shall enter into an Equity Interest Purchase Agreement in a form reasonably acceptable to Party A, setting forth the terms and conditions for the sale and transfer of the Purchased Equity Interest;

1.4.3           The relevant Parties shall execute, without any security interest, all other requisite contracts, agreements or documents, obtain all requisite approval and consent of the government, conduct all necessary actions, transfer the valid ownership of the Purchased Equity Interest to Party A and/or the Designee, and cause Party A and/or the Designee to be the registered owner of the Purchased Equity Interest.  As used herein, “security interest” means any mortgage, pledge, the right or interest of the third party, any purchase right of equity interest, right of acquisition, right of first refusal, right of set-off, ownership detainment or other security arrangements; however, such term shall not include any security interest created under that certain Equity Pledge Agreement dated as of May 15, 2012 by and among the Parties (the “ Pledge Agreement ”).
 
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Option Agreement

 

1.5            Payment .  Payment of the purchase price shall be determined through negotiation between Party C and Party A in accordance with the applicable laws at the time of the exercise of the Option.

2.            REPRESENTATIONS RELATING TO OPTION EQUITY INTEREST

2.1            Party B’s Representations .  Party B hereby represents and warrants:

2.1.1           Without Party A’s prior written consent, Party B’s Articles of Association shall not be supplemented, changed or renewed in any way, Party B’s registered capital of shall not be increased or decreased, and the structure of Party B’s registered capital shall not be changed in any form;

2.1.2           To maintain the corporate existence of Party B and to prudently and effectively operate the Business according with customary fiduciary standards applicable to managers with respect to corporations and their shareholders;

2.1.3           Without Party A’s prior written consent, upon the execution of this Agreement, to not sell, transfer, mortgage, create pledges, liens, or any other encumbrances on or dispose, in any other form, any asset, legitimate or beneficial interest of business or income, or encumber or approve any encumbrance or imposition of any security interest on Party B’s assets;

2.1.4           Not to issue or provide any guarantee or permit the existence of any debt without Party A’s prior written consent, other than (i) such debt that may arise from Party B’s ordinary course of business (excepting a loan); and (ii) such debt which has been disclosed to Party A;

2.1.5           To operate and conduct all business operations in the ordinary course of business, without damaging the Business or the value of Party B’s assets;

2.1.6           To not enter into any material agreements without Party A’s prior written consent, other than agreements entered into in the ordinary course of business (for purpose of this paragraph, if any agreement for an amount in excess of One Hundred Thousand Renminbi (RMB 100,000) shall be deemed a material agreement);
 
 
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Option Agreement

 
 
2.1.7           To not provide loan or credit to any other party or organization without Party A’s prior written consent;

2.1.8           To provide to Party A all relevant documents relating to the Business and its operations and finance at the request of Party A;

2.1.9           To purchase and maintain general business insurance of the type and amount comparable to those held by companies in the same industry, with similar business operations and assets as Party B, from an insurance company approved by Party A;

2.1.10         To not enter into any merger, cooperation, acquisition or investment without Party A’s prior written consent;

2.1.11         To notify Party A of the occurrence or the potential occurrence of litigation, arbitration or administrative procedure relating to Party B’s assets, business operations and/or income;

2.1.12         In order to guarantee the ownership of Party B’s assets, to execute all requisite or relevant documents, take all requisite or relevant actions, and make and pursue all relevant claims;

2.1.13         To not assign the Option Equity Interest or distribute dividends in any form without Party A’s prior written notice; however, Party B shall distribute dividends to the Party A and/or Party D upon the request of Party A; and

2.1.14         In accordance with Party A’s request, to appoint any person designated by Party A to a management position for Party B.

2.2            Representations of Party C .   Party C hereby respectively and jointly represent and warrant:

2.2.1           Without Party A’s prior written consent, upon the execution of this Agreement, to not sell, transfer, mortgage, create pledges, liens, or any other encumbrances on or dispose in any other form any legitimate or beneficial interest of the Option Equity Interest, or to approve any security interest, except as created pursuant to the Pledge Agreement;

2.2.2           Without Party A’s prior written notice, to not adopt or support or execute any shareholders resolution at any meeting of the shareholders of Party B that seeks to approve any sale, transfer, alter, mortgage or disposal of any legitimate or beneficial interest of the Option Equity Interest, or to allow any attachment of security interests, except as created pursuant to the Pledge Agreement;
 
 
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Option Agreement

 

2.2.3           Without Party A’s prior written notice, to not agree or support or execute any shareholders resolution at any meeting of the shareholders of Party B that seeks to approve Party B’s merger, cooperation, acquisition or investment;
 
2.2.4           To notify Party A the occurrence or the potential occurrence of any litigation, arbitration or administrative procedure relevant to the Option Equity Interest;

2.2.5           To cause Party B’s Board of Directors to approve the transfer of the Purchased Equity Interest pursuant to this Agreement;

2.2.6           In order to maintain the ownership of Option Equity Interest, to execute all requisite or relevant documents, conduct all requisite or relevant actions, and make all requisite or relevant claims, or make requisite or relevant defense against all claims of compensation;

2.2.7           Upon the request of Party A, to appoint any person designated by Party A to be a director of Party B; and

2.2.8           To prudently comply with the provisions of this Agreement and any other agreements entered into with Party A and Party B in connection therewith, and to perform all obligations under all such agreements, without taking any action or nonfeasance that may affect the validity and enforceability of such agreements.

3.            Representations and Warranties .  As of the execution date of this Agreement and on each transfer of Purchased Equity Interest pursuant to an exercise of the Option, Party B and Party C hereby represent and warrant as follows:

3.1           Such Parties shall have the power and ability to enter into and deliver this Agreement and to perform their respective obligations thereunder, and at each transfer of Purchased Equity Interest, the relevant Equity Interest Purchase Agreement and to perform their obligations thereunder.  Upon execution, this Agreement and each Equity Interest Purchase Agreement will constitute legal, valid and binding obligations and be fully enforceable in accordance with their terms;
 
 
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Option Agreement

 
 
3.2     The execution and performance of this Agreement and any Equity Interest Purchase Agreement shall not: (i) violate any relevant laws and regulations of the PRC; (ii) conflict with the Articles of Association or other organizational documents of Party B; (iii) cause to breach any agreements or instruments or having binding obligation on it, or constitute a breach under any agreements or instruments or having binding obligation on it; (iv) breach relevant authorization of any consent or approval and/or any effective conditions; or (v) cause any authorized consent or approval to be suspended, removed, or cause other added conditions;
 
3.3           The Option Equity Interest is transferable in whole and in part only upon Party A’s prior written consent, and neither Party B nor Party C has permitted or caused any security interest to be imposed upon the Option Equity Interest other than pursuant to the Pledge Agreement;

3.4           Party B does not have any unpaid debt, other than (i) such debt that may arise during the ordinary course of business; and (ii) debt either disclosed to Party A or incurred pursuant to Party A’s written consent;

3.5           Party B has complied with all applicable PRC laws and regulations in connection with this Agreement;

3.6           There are no pending or ongoing litigation, arbitration or administrative procedures with respect Party B, its assets or the Option Equity Interests, and Party B and Party C have no knowledge of any pending or threatened claims to the best of their knowledge; and

3.7           Party C owns the Option Equity Interest free and clear of encumbrances of any kind, other than the security interest pursuant to the Pledge Agreement.

4.            ASSIGNMENT OF AGREEMENT

4.1           Party B and Party C shall not transfer their rights and obligations under this Agreement to any third party without Party A’s prior written consent.

4.2           Party B and Party C hereby agrees that Party A shall be able to transfer all of its rights and obligations under this Agreement to any third party, and such transfer shall only be subject to a written notice of Party A to Party B and Party C without any further consent from Party B or Party C.

5.            EFFECTIVE DATE AND TERM
 
 
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Option Agreement

 
 
5.1           This Agreement shall take effect on the date of execution of this agreement and shall remain in full force and effect for the maximum period of time permitted by law unless sooner terminated pursuant to Clause 5.2.

5.2           This Agreement shall remain in full force and effect for the maximum period of time permitted by law. The phrase “maximum period of time permitted by law” shall mean the time period from the execution date of this agreement to the last date of Party B’s operation term set forth in its business license. If Party B’s operation term is extendible, Party B shall use its best efforts to renew its business license and extend its operation term until and unless otherwise instructed in Party A’s prior written notice. When Party B’s operation term is extended, such time period shall be automatically extended to the last date of Party B’s extended operation term as set forth in its new business license. Notwithstanding the foregoing stipulation, Party A shall have the right to terminate this Agreement at any time by giving a thirty (30) day prior written notice to other Parties. During the effective term of this Agreement, any Party except Party A shall have no right to terminate this Agreement.

5.3           Party A shall have no liability to the other Party for indemnity, compensation or damages arising solely from the exercise of such termination right when Party A elects to terminate this Agreement pursuant to Clause 5.2.  The expiration or termination of this Agreement shall not affect the continuing liability of Party B to pay any Consulting Services Fees already accrued or due and payable to Party A.  Upon expiration or termination of this Agreement, all amounts then due and unpaid to Party A by Party B hereunder, as well as all other amounts accrued but not yet payable to Party A by Party B, shall hereby become due and payable by Party B to Party A.

6.            APPLICABLE LAWS AND DISPUTE RESOLUTION

6.1            Applicable Laws .  The execution, validity, interpretation and performance of this Agreement and the dispute resolution under this Agreement shall be governed by the laws of PRC.

6.2            Arbitration .  Any dispute arising from, out of or in connection with this Agreement shall be settled through amicable negotiations between the Parties.  Such negotiations shall begin immediately after one Party has delivered to the other Party a written request for such negotiation.  If, within ninety (90) days following the date of such notice, the dispute cannot be settled through negotiations, the dispute shall, upon the request of either Party with notice to the other Party, be submitted to arbitration in China under the auspices of China International Economic and Trade Arbitration Commission (the “CIETAC”).  The Parties shall jointly appoint a qualified interpreter for the arbitration proceeding and shall be responsible for sharing in equal portions the expenses incurred by such appointment.  The arbitration proceeding shall take place in Shanghai, China.  The outcome of the arbitration shall be final and binding and enforceable upon the Parties.

 
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Option Agreement

 
 
6.2.1            Arbitration Language and Rules .  Unless otherwise provided by the arbitration rules of CIETAC, the arbitration proceeding shall be conducted in English. The arbitration tribunal shall be formed pursuant to the arbitration rules of CIETAC. Party B, Party C and Party D shall be deemed as one party in arbitration proceedings for purpose of the arbitration under this Agreement. The arbitration tribunal shall apply the arbitration rules of the CIETAC in effect on the date of execution of this Agreement.  However, if such rules are in conflict with the provisions of this clause, or with Section 6 of this Agreement, then the terms of Section 6 of this Agreement shall prevail.

6.2.2            Cooperation; Disclosure . Each Party shall cooperate with the other Party in making full disclosure of and providing complete access to all information and documents requested by the other Party in connection with such proceedings, subject only to any confidentiality obligations binding on such Parties.

6. 3            Jurisdiction . Judgment rendered by the arbitration may be entered into by any court having jurisdiction, or application may be made to such court for a judicial recognition of the judgment or any order of enforcement thereof.
 
7.            Taxes and Expenses .  Each Party shall, according with PRC laws, bear any and all registration taxes, costs and expenses for the transfer of equity arising from the preparation, execution and completion of this Agreement and all Equity Interest Purchase Agreements.

8.            Notices .  Notices or other communications required to be given by any Party pursuant to this Agreement shall be written in English and Chinese and delivered personally or sent by registered mail or prepaid mail or by a recognized courier service or by facsimile transmission to the relevant address of each Party as set forth below or other addresses of the Party as specified by such Party from time to time.  The date when the notice is deemed to be duly served shall be determined as follows: (a) a notice delivered personally is deemed duly served upon the delivery; (b) a notice sent by mail is deemed duly served the tenth (10th) day after the date of the air registered mail with the postage prepaid has been sent out (as is shown on the postmark), or the fourth (4th) day after the delivery by an internationally recognized courier service; and (c) a notice sent by facsimile transmission is deemed duly served upon the receipt time as shown on the transmission confirmation.

Party A
Zhejiang Jiuxin Investment Management Co., Ltd.
 
Address: Room 101, No. 9-3 Da Guan Nan Si Yuan, Gongshu District, Hangzhou City, Zhejiang Province, China
 
Attn:  LIU Lei
 
Fax: +86-571-88233598
 
Tel: +86-571-88078153
 
 
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Option Agreement

 
 
Party B:
  
Zhejiang Jiuying Grand Pharmacy Co., Ltd.
 
  
Address: No.51, Jiajia Lane, Xiaohe Street, Gongshu District, Hangzhou City, Zhejiang Province, China
 
  
Attn: LIU Lei
 
  
Fax: +86-571-88233598
 
  
Tel: +86-571-88078276
     
Party C:
   
     
 
PartyC1
LIU Lei
   
Address: Room 507-513, 5th Floor A Building, Meidu Plaza, Gonshu District, Hangzhou City, Zhejiang Province, China
   
Fax: +86-571-88233598
   
Tel: +86-571-88078153
     
 
PartyC2
JIN Chong’an
   
Address: Room 507-513, 5th Floor A Building, Meidu Plaza, Gonshu District, Hangzhou City, Zhejiang Province, China
   
Fax: +86-571-88233598
   
Tel: +86-571-88078153
     
 
PartyC3
QI Li
   
Address: Room 507-513, 5th Floor A Building, Meidu Plaza, Gonshu District, Hangzhou City, Zhejiang Province, China
   
Fax: +86-571-88233598
   
Tel: +86-571-88078153

9.            Confidentiality .  The Parties acknowledge and confirm that any oral or written information exchanged by the Parties in connection with this Agreement is confidential.  The Parties shall maintain the confidentiality of all such information. Without the written approval by the other Parties, any Party shall not disclose to any third party any confidential information except as follows:
 
 
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Option Agreement

 
 
(a)           Such information was in the public domain at the time it was communicated;

(b)           Such information is required to be disclosed pursuant to the applicable laws, regulations, policies relating to the stock exchange; or

(c)           Such information is required to be disclosed to a Party’s legal counsel or financial consultant, provided however, such legal counsel and/or financial consultant shall also comply with the confidentiality as stated hereof.  The disclosure of confidential information by employees or agents of the disclosing Party is deemed to be an act of the disclosing Party, and such Party shall be responsible for all breach of confidentiality arising from such disclosure.  This provision shall survive even if certain clauses of this Agreement are subsequently amended, revoked, terminated or determined to be invalid or unable to implement for any reason.

10.            Further Warranties .  The Parties agree to promptly execute such documents as required to perform the provisions of this Agreement, and to take such actions as may be reasonably required to perform the provisions of this Agreement.

11.            MISCELLANEOUS

11.1           Amendment, Modification and Supplement .  Any amendments and supplements to this Agreement shall only take effect if executed by both Parties in writing.

11.2           Entire Agreement .  Notwithstanding Article 5 of this Agreement, the Parties acknowledge that this Agreement constitutes the entire agreement of the Parties with respect to the subject matters therein and supercede and replace all prior or contemporaneous agreements and understandings, whether oral or in writing.

11.3           Severability .  If any provision of this Agreement is deemed invalid or non-enforceable according with relevant laws, such provision shall be deemed invalid only within the applicable laws and regulations of the PRC, and the validity, legality and enforceability of the other provisions hereof shall not be affected or impaired in any way.  The Parties shall, through reasonable negotiation, replace such invalid, illegal or non-enforceable provisions with valid provisions in order to bring similar economic effects of those invalid, illegal or non-enforceable provisions.

11.4           Headings .  The headings contained in this Agreement are for reference only and shall not affect the interpretation and explanation of the provisions in this Agreement.

 
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Option Agreement

 

11.5           Language and Copies .  This Agreement shall be executed in both English and Chinese in seven (7) duplicate originals. Each Party shall hold one (1) original, each of which shall have the same legal effect.

11.6           Successor .  This Agreement shall be binding on the successors of each Party and the transferee allowed by each Party.

11.7           Survival .  Each Party shall continue to perform its obligations notwithstanding the expiration or termination of this Agreement.  Article 6, Article 8, Article 9 and Section 11.7 hereof shall continue to be in full force and effect after the termination of this Agreement.

11.8           Waiver .  Any Party may waive the terms and conditions of this Agreement in writing with the written approval of all the Parties.  Under certain circumstances, any waiver by a Party to the breach of other Parties shall not be construed as a waiver of any other breach by any other Parties under similar circumstances.

[SIGNATURE PAGE FOLLOWS]
 
 
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[SIGNATURE PAGE]

IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives.

 
PARTY A:
Zhejiang Jiuxin Investment Management Co., Ltd.
 
Legal/Authorized Representative: /s/ LIU Lei
 
Name: LIU Lei
 
Title: Executive Director
 
 
   
PARTY B:
Zhejiang Jiuying Grand Pharmacy Co., Ltd.
  Legal/Authorized Representative: /s/ LIU Lei
 
Name: LIU Lei
 
Title: Executive Director

 
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Option Agreement

 

SIGNATURE PAGE FOR PARTY C

Party C

/s/ LIU Lei
LIU Lei

Owns 19.89% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330107196310260910



/s/ JIN Chong’an
JIN Chong’an

Owns 15.81% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 440102196306183258
 
 

/s/ QI Li  
QI Li

Owns 15.3% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.
ID Card No.: 330106197205090081
 
 
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Option Agreement

 
 
SIGNATURE PAGE FOR PARTY D

ACKNOWLEDGED BY:

Zhejiang Shouantang Medical Technology Co., Ltd.
Owns 39% of Zhejiang Jiuying Grand Pharmacy Co., Ltd.


Legal/Authorized Representative: /s/ LIU Lei
Name: LIU Lei
Title: Executive Director
 
 
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Option Agreement
 

Exhibit 99.1
 

 
China Jo-Jo Drugstores Announces New Store Openings in Shanghai and Hangzhou
 
HANGZHOU, China--(BUSINESS WIRE)--May 17, 2012--China Jo-Jo Drugstores, Inc. (NASDAQ:CJJD) (the “Company”), a retail pharmacy chain in Zhejiang and Shanghai, today announced two new store openings in Shanghai and Hangzhou, increasing the Company’s total store count to 61. Three additional stores are planned to be opened in Hangzhou by mid-2012.
 
“We continue to implement our plans of opening new stores in premium locations and providing excellent, customized services to customers with increasing healthcare needs,” says Mr. Lei Liu, Chairman and CEO of China Jo-Jo Drugstores. “The new store in Shanghai and Hangzhou will further strengthen our dominant position in Hangzhou and increase our foothold in Shanghai, China’s wealthiest city. We plan to open more stores in Shanghai and Zhejiang in the future while remaining focused on our overall vertical integration strategy.”
 
The newly opened stores are:
 
 
1.
Zhejiang Jiuying Grand Pharmacy in Hangzhou: The 110 square-meter, or 1,184 square feet, store opened in March. The Company plans to open three additional stores under the Jiuying Drugstore or Jiuying Grand Pharmacy brand in Hangzhou later this year. The Jiuying store brand is wholly owned by the Company.
     
 
2.
Lydia Grand Pharmacy in Taopu Road, Shanghai. The 160 square-meter, or 1,722 square-feet, store opened in March, bringing the total number of stores that the Company now operates in Shanghai to three.
 
Photographs of these stores are posted on our website at http://www.chinajojodrugstores.com/.
 
In addition to the new stores, the Company now has over 800,000 members enrolled in its loyalty program, and anticipates that its revenue should increase this year as new stores are added and existing stores become eligible to accept government-insured costumers.
 
About China Jo-Jo Drugstores, Inc.
 
China Jo-Jo Drugstores, Inc. primarily operates a retail pharmacy chain in Zhejiang and Shanghai, offering both western and traditional Chinese medicine, including prescription and over-the-counter drugs, sundries, nutritional supplements and medical devices. China Jo-Jo Drugstores also provides on-site physician consulting.
 
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
 
 
CONTACT:
China Jo-Jo Drugstores, Inc.
Ming Zhao, Chief Financial Officer
561-372-5555
frank.zhao@jojodrugstores.com