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
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Date of Report (Date of Earliest event Reported): October 16, 2008 (October 10, 2008) |
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| CHINA BIOLOGIC PRODUCTS, INC. | ||||||||
| (Exact name of registrant as specified in its charter) | ||||||||
| Delaware | 000-52807 | 75-2308816 | ||||||
| (State of Incorporation) | (Commission File No.) | (IRS Employer ID No.) | ||||||
| No. 14 East Hushan Road, | ||||||||
| Taian City, Shandong 271000 | ||||||||
| People's Republic of China | ||||||||
| (Address of Principal Executive Offices) | ||||||||
| (+86) 538 -620-2306 | ||||||||
| Registrant's Telephone Number, Including Area Code | ||||||||
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 (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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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
Equity Transfer Agreement
On October 10, 2008, Shandong Taibang Biological Products Co., Ltd.("Taibang"), an indirect majority-owned subsidiary of China Biologic Products, Inc. (the "Company"), entered into an Equity Transfer Agreement (the "Equity Transfer Agreement") with Mr. Fan Qingchun (the "Transferor"), a PRC citizen holding 35% of the equity interest in Xi'an Huitian Blood Products Co., Ltd. ("Huitian"), a PRC limited liabilities company. An English translation of the Equity Transfer Agreement is attached hereto as Exhibit 10.1.
Pursuant to the Equity Transfer Agreement, the Transferor agrees to sell to Taibang, and Taibang agrees to purchase from the Transferor, 35% equity interest in Huitian (the "Subject Equity Interests") for an aggregate purchase price of RMB 44,000,000 (the "Transfer Price"). As of the date hereof, Taibang has paid to the Transferor RMB 10,000,000 as deposit, which will become its initial installment after this equity transfer has been registered with the local Administration of Industry & Commerce. Within 5 business days after completion of certain pledge and entrustment procedures in favor of Taibang relating to the equity transfer, Taibang will pay the Transferor a second installment of RMB 12,000,000. The balance of the Transfer Price will be paid within 5 days following the 6 months anniversary of October 1, 2008.
If Taibang discovers any pre-existing hidden liabilities in Huitian that were not disclosed to Taibang prior to the execution of the Equity Transfer Agreement, the Transfer Price will be reduced by the amount of 35% of such undisclosed liabilities, and Taibang will only pay to Huitian the post-deduction balance for this equity transfer.
After Transferor receives from Taibang the second installment, Transferor shall entrust all the Subject Equity Interests to Taibang, and Taibang will dispatch to Huitian management staff who will replace the Transferor's appointees and exercise their powers subject to the charter of Huitian.
If Taibang fails to pay within 10 working days after each due date for any installment, it will be liable for liquidated damages in the amount of 10% of such unpaid due amount in addition to the accrued interests. If the Transferor fails to assist in the transitional procedures within 10 working days after Taibang's request, the Transferor shall pay to Taibang as liquidated damages an amount equal to 10% of the portion of the Transfer Price that has been paid by Taibang.
Two-party Joint Venture and Cooperation Agreement
Taibang has also entered into a Joint Venture and Cooperation Agreement (the "Two-Party JV Agreement") with Shaanxi Power Construction Corporation ("Shaanxi Construction"), pursuant to which Shaanxi Construction has waived its right of first refusal to purchase equity interests in Huitian and has agreed that Taibang may acquire the 35% equity interest in Huitian, and Taibang agrees to keep the entire transaction fair and transparent. Neither Taibang nor Shaanxi Construction may, within 5 years after conclusion of the Equity Transfer Agreement, transfer its respective equity interest in Huitian to any person other than to the existing shareholders. After such period the then-existing shareholders will have rights of first refusal to purchase any equity interest that is intended to be transferred.
According to the terms of the agreement, Huitian's board of directors will have five members, among whom three will be appointed by Shaanxi Construction and two by Taibang, and Huitian's management will consist of five members, among whom three will be recommended by Shaanxi Construction and two will be recommended by Taibang. Otherwise, Huitian's shareholders will exercise their voting rights in the shareholders meeting according to their respective capital contribution ratios.
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Taibang also agreed that it will provide technical support to Huitian for Huitian's GMP renovation and research and development, provide to Huitian its longtime management experience without reservation, assign its competent employees to work at Huitian, and coordinate to maintain good public relations. Shaanxi Construction agreed to assist Taibang with local governmental registration matters in relation to the equity transfer and both parties agree to maintain Huitian's current operation guidelines. The agreement provides for liquidated damages in the amount of RMB 1,000,000, and the breaching party is liable to pay the non-breaching party additional damages for any losses its breach has caused.
Three-party Joint Venture and Cooperation Agreement
Taibang has entered into an Agreement on Equity Transfer, Acquisition, Joint Venture and Cooperation with Shaanxi Construction and the Shareholder (the "Three-Party JV Agreement"), pursuant to which the parties agreed that, with respect to the transfer of 35% equity interest in Huitian, delivery by the parties of the following documents will be conditions to the agreements taking effect: (1) the Shareholder's consent to the equity transfer; (2) resolution of Taibang's shareholders' meeting (or board of directors) approving the acquisition; (3) Shaanxi Construction's consent to the transfer and its waiver of right of first refusal; (4) Huitian's shareholder resolution; and (5) a warrant letter issued by the Shareholder to Shaanxi Construction.
After paying the first installment of the transfer price, Taibang will be entitled to exercise rights in Huitian as a shareholder, and Shaanxi Construction and Taibang agreed to effect the amendment of Huitian's articles of association, the re-election of Huitian's board of directors and board of supervisors, and the engagement of new executive officers, among other things. Any party in breach of the Three-Party JV Agreement will pay liquidated damages of RMB1,000,000 to the non-breaching party and compensate the non-breaching party for any losses incurred.
Investment Entrustment Agreement
Through its wholly owned subsidiary, Logic Express Ltd ("Logic Express"), the Company has also entered into an investment entrustment agreement (the "Investment Agreement") with the minority shareholder in Taibang, Shandong Biological Products Research Institute ("Biological Institute"), pursuant to which Logic Express agrees to provide the investment amount for the acquisition and the Shandong Institute agree to entrust Taibang to acquire the 35% equity interest of Huitian in its name. In exchange Logic Express is also obligated to pay Taibang RMB120,000 per year as consideration for Taibang's performance under this agreement.
Under the Investment Agreement, after the acquisition, Logic Express will be in charge of Huitian's daily operation and management, will bear the costs, expenses, liabilities and losses incurred in its operation, and will enjoy its profits. Taibang will perform relevant tasks according to Logic Express's instruction, and will not exercise any management right over Huitian or derive any financial return from Huitian. Logic Express agreed to indemnify Taibang for any loss in connection with the investment and pledged its equity interest in Taibang as collateral against such losses.
Logic Express will have the right to repurchase the equity interests in Huitian from Taibang, when practicable, and Taibang agreed to unconditionally cooperate in such purchase.
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The foregoing description does not purport to be a complete statement of the parties' rights and obligations under the three ancillary agreements described above or the transactions contemplated thereby
or a complete explanation of the material terms thereof. The foregoing description of the Equity Transfer Agreement, the Two-Party JV Agreement, Three-Party JV Agreement, and the Investment Agreement is qualified in its entirety by reference to those agreements attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4. The Company's press release regarding the Equity Transfer Agreement is filed as Exhibit 99.1 hereto.ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CHINA BIOLOGIC PRODUCTS, INC. | ||
| Date: October 16, 2008 | /s/ Chao Ming Zhao | |
| Chao Ming Zhao | ||
| Chief Executive Officer | ||
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EXHIBIT INDEX
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Exhibit 10.1
Thelen Translation (10-10-2008)
Equity Transfer Agreement
This Equity Transfer Agreement is entered into as of October 10, 2008 in Xi'an by and between the following parties:
Transferor: Fan Qingchun (hereinafter the " Transferor " )
The Transferor is an individual residing in the People's Republic of China with the ID card No. 412901196912053094 and his address is Room 508, Building 2, Suojinsicun, Xuanwu District, Nanjing City.
The Transferee: Shandong Taibang Biological Products Co., Ltd. (hereinafter, the " Transferee " )
The Transferee has been established in the People's Republic of China with the business license code Qi He Lu Tai Zong Zi No. 000689, and its registered address is No. 14 Hushandong Road, Tai'an City, Shandong Province.
Whereas:
1.
Xi'an Huitian Blood Products Co., Ltd. (hereinafter, the "
Xi'an Huitian "), established by the Transferor and Shaanxi Power Construction Corporation (hereinafter, the " Shaanxi Power Construction "), is a limited liabilities company duly established and lawfully existing. Xi'an Huitian was established on October 17, 1996. Its Business License Number is 610131100005945 and the domicile is at No. 9, Guangde Road, Xi'an Hi-Tech Industries Development Zone. Its registered capital is RMB 51,000,000 and its enterprise form is limited liabilities company.2.
The Transferor is a lawful shareholder of Xi'an Huitian and his capital contribution in the registered capital of Xi'an Huitian is RMB17,850,000, holding 35% of the equity interest in Xi'an Huitian (hereinafter, the "
Subject Equity Interests ").3.
The Transferor proposes to transfer such Subject Equity Interests to the Transferee so
that the Transferee would finally hold 35% of the total equity interest in Xi'an Huitian, and the Transferee agrees to accept such transfer.
1
4.
The Transferor holds lawful titles to the Subject Equity Interests, and the Transferor has not entered into any agreement for sales of the Subject Equity Interests or any binding option agreement or right of first refusal agreement with any third Person except the Transferee. There does not exist any Security Interests or judicial garnishment or attachment upon the Subject Equity Interests and affiliated interests therein.
5.
This equity transfer has been unanimously approved by shareholders' meeting of Xi'an Huitian, and Shaanxi Power Construction
has agreed on this equity transfer and has not waived its right of first refusal.6.
The Transferee proposes to accept the Subject Equity Interests, and this equity transfer has been approved by the Board of Directors of the Transferee.
7.
The Transferee has engaged Intermediary Agents to investigate and audit the assets, financials, material contracts, internal control and other information and data of Xi'an Huitian and has been aware of the basic status of Xi'an Huitian.
8.
The Transferee has paid the Transferor RMB 10,000,000 into the bank account designated by the Transferor in this Agreement as the Deposit Money to ensure mutual performance of this Agreement. The Transferor has received such money through the bank account designated by the Transferor in this Agreement and pledges that it will perform this Agreement in earnest.
9.
The blood product industry is restricted for foreign investment, and this equity transfer needs approval from G overnment Authorities; this equity transfer has not been approved by Government Authorities
NOW THEREFORE, through friendly consultation and for mutual benefits, the Parties have entered into this agreement for security interests, escrow and transfer of equity interests in accordance with the relevant laws and regulations of the PRC.
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Article 1 Definitions
1-1
Unless stipulated otherwise in this Agreement, the following items in this Agreement are defined as follows:
Person:
means any natural persons, companies, partnerships, joint ventures, firms,
associations, Government Authorities, or other civil subjects.
This Agreement:
means this Equity Transfer Agreement and all its attachments
and appendices. "This Agreement" or other similar items refer to the entirety
of this Agreement, not any specific articles thereof. Any "this Agreement"
mentioned herein means this Agreement and its attachments and appendices as
supplemented and amended from time to time.
Security Interests:
means any mortgage, pledge, lien, deposit money,
preemptive rights prescribed by law or other third-party priority right.
Affiliated Party:
As to any Person, it means any Person controlling such
party, being controlled by such party or under common control with such party,
directly or indirectly. If any Person directly or indirectly holds more than
50% of voting equity interests (shares) or economic interests of one party, or
has the power to appoint a majority of the Board of Directors of such party,
this Person is deemed to have control on such party.
Closing: means that the Transferor registers all the Subject Equity Interests in the name of the Transferee and go through the registration formalities for amending Xi'an Huitian's Contract and Articles of Associations according to this Agreement (completion of the formalities for alteration registration with AIC for equity interests transfer will indicate consummation of Closing).
Date of Closing: means the day on which all the Subject Equity Interests have been registered in the name of the Transferee (i.e. the date on which the alteration registration formalities with AIC are completed for the equity interests transfer).
Transition of Equity Interest or Transition: means that the Transferee, pursuant to the Shareholder Joint Venture and Cooperation Agreement entered into with Shaanxi Power Construction or the entrustment agreement for the Subject Equity Interest entered into with the Transferee, dispatches its staff to Xi'an Huitian to take over all or part of the liabilities and obligations of the Transferor in Xi'an Huitian and enjoy the rights derived from the 35% equity interests in Xi'an Huitian.
Intellectual Property and Administrative Approval: means any patent, patent application right, copyright, trademark, domain name, proprietary technology, commercial secrets, trade name, mark, GMP certificate, production permit, production approval, plasma collection permit and other intellectual products and professional rights, and any rights relating to the application, registration and grants thereof.
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Material Adverse Effect:
(1) Any event, circumstance or act, newly discovered by the Transferor or the Transferee after the Date of Execution and not known in the past, which occurred prior to the Date of Transition and will have material adverse effect on the general business, financial conditions, properties, business or performance results of Xi'an Huitian, provided however that no event, circumstance or act should be deemed as Material Adverse Effect if its reasonably expected financial impact is less than 10% of Xi'an Huitian's audited net asset amount for the year 2007 as audited under Independent Auditing Standards of the PRC; Material Adverse Effect also excludes the following: (i) amendments to Independent Auditing Standards and Enterprise Accounting Standards of the PRC; and (ii) revision by the PRC Government Authorities to the laws and their interpretations applicable to enterprises or others.
(2) Material Change: means any change that would or may result in Material Adverse Effect on an independent or accumulative basis.
Effects that materially impede the capabilities of the Transferor or the Transferee to respectively perform their obligations under this Agreement, or effects that materially threaten or impede the performance of the proposed transaction under this Agreement.
Deposit Money: means money paid by the Transferor to the Transferee for performance security purpose to ensure mutual compliance with this Agreement. If the Transferor breaches this Agreement by transferring the Subject Equity Interests to any third party without prior permission from Transferee and makes this Agreement unenforceable, the Transferor should repay twice such deposit amount. If the Transferee does not pay the Transferor the second installment in accordance with this Agreement and the Transferor decides to rescind this Agreement with the Transferee, the Transferor will not return such security money.
Subsidiary: As to any Person, if any company or other entity holds more than 50% equity interest of such Person or other interests on the basis of which it could elect the majority of the Board of Directors of such Person, this Person is the Subsidiary of such company or other entity.
Accrued Interests: mean any benefits or rights that would or may accrue on the Subject Equity Interests prior to the Date of Closing, including but not limited to dividends, equity earnings, share dividend, share allotment, etc.
Attachments: All the information and data relating to this Agreement which have been provided by one Party according to the notice methods hereunder and confirmed by the other Party by the Date of Closing, and other agreements entered into by the Parties relating to this Agreement, both of which constitute attachments to this Agreement, including but not limited to the attachment attached to this Agreement.
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Data: All written data provided by the Transferor or Xi'an Huitian in the process of due diligence and received by the Transferee, its financial consultant, auditor or attorney.
Plasma Companies: mean plasma collection companies duly established and validly existing in Shaanxi Province. Xi'an Huitian now solely owns Baishui Huitian Plasmaphoresis Station Co., Ltd. and Fuping Huitian Plasmaphoresis Station Co., Ltd. Ankang Hanbin Huitian Yongdong Plasmaphoresis Station Co., Ltd. has finished its restructuring and established one-on-one plasma supply relationship with Xi'an Huitian, but it has not completed AIC registration formalities.
Contingent Liabilities: mean the liabilities that Xi'an Huitian shall pay for as a result of external guarantee, debt, contract and litigation, and undisclosed taxation that were concealed prior to the execution of this Agreement.
Obligation to Assist: mean obligations the Transferor has promised to the Transferee that the Transferor will perform in connection with the pledge, entrustment, governmental approvals, AIC alteration registration of the Subject Equity Interests involved in this Agreement that the Transferor could complete independently without assistance or approvals from Governmental Authorities, Xi'an Huitian or Shaanxi Power Construction.
Government Authorities: mean the central and local governments (including the commerce authorities and their subordinates and constituent departments) and entities have been empowered by law or delegated to exercise state administrative power.
1-2
Unless provided otherwise, if expiration of a certain term as required by this Agreement falls upon a date that is not a Business Day, such term will be extended to the immediately following Business Day after such non-Business Day.
Article 2 Equity Transfer Price and Payment
2-1
Equity Transfer Price
2-1-1
The Parties agree that the Transfer Price for Subject Equity Interests and Accrued Interests is RMB44,000,000 only (Forty-Four Million RMB).
2-1-2
The interests of Subject Equity Interests and Accrued Interests are subject to the Shareholders Joint Venture and Cooperation Agreement between the Transferee and Shaanxi Power Construction and the revised Article of Association.
2-1-3
The rights and liabilities between the Transferor, Shaanxi Power Construction and its affiliates and Xi'an Huitian have been confirmed by Xi'an Huitian, the Transferor and Shaanxi Power Construction.
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2-2 Payment Dates and Arrangements for Payments:
2-2-1
The Transferor shall, from the date of execution, assist the Transferee in completing the approval formalities for such equity transfer from Government Authorities and assist in AIC alteration registration of the Subject Equity Interests and register the Subject Equity Interests in the name of the Transferee or the Affiliated Party. After the AIC alteration registration, the Deposit Money of RMB 10,000,000 paid by the Transferee to the Transferor will automatically become the initial installment of consideration.
2-2-2
Simultaneous to the execution of this Equity Transfer Agreement, the Transferor and the Transferee will sign a pledge agreement and an entrustment agreement regarding the Subject Equity Interests, under which the Transferor shall immediately pledge the Subject Equity Interests to the Transferee or a financial institution designated by the Transferee and the entrustment agreement shall be immediately notarized, which shall take effect after the second installment is paid from the Transferee to the Transferor. Within 5 days after completion of the pledge and notarization formalities, the Transferee shall pay RMB 12,000,000 to the Transferor as the second installment. With the assistance from the Transferor, the Transferee shall complete the pledge and entrustment formalities for the Subject Equity Interests within one month after the execution of this Agreement. If the pledge and entrustment formalities for the Subject Equity Interests could not be completed within one month after the execution of this Agreement for any reason other than absence of timely assistance from the Transferor, the Transferee shall still pay the second installment to the Transferor. After the Transferor has received the second installment, the entrustment agreement of the Subject Equity Interests shall immediately take effect and the Transferor shall immediately formally entrust the Subject Equity Interests to the Transferee. The Transferor shall finish the transition matters for Xi'an Huitian according to the requirements of the Transferee and shall agree that the Transferee will exercise all the rights of 35% equity interests in Xi'an Huitian and enjoy all the benefits therefrom.
2-2-3
There shall be interests accrued upon the Transferee's unpaid transfer price, calculated at annual rate of 8% from October 1, 2008. The balance of the transfer price shall be fully paid within 5 days following the 6 months anniversary of October 1, 2008. If the Transferor's failure to provide timely assistance to the completion of pledge and entrustment of equity interests, governmental approvals of the equity transfer and AIC alteration registration leads to any delay in the completion of such formalities, then the Transferee has the right to correspondingly postpone the payment of the transfer price without interests accruing during the period of such postponement, unless the Transferee has already been in breach of this Agreement.
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2-2-4
If it is found that there are pre-existing Contingent Liabilities in Xi'an Huitian before the date of execution, the Transferee will deduct 35% of such Contingent Liabilities and then pay the post-deduction balance of the transfer price according to Article 2-2-3.
2-2-5
If the Transferee fails to pay within 10 working days after each due date for any installment, there will be liquidated damages in the amount of 10% of such unpaid due amount in addition to the accrued interests. This liquidated damages and the interests under Article 2-2-3 shall be calculated and paid at the payment of the last installment. If the Transferor fails to assist in completion of the abovementioned formalities within 10 working days from the receipt of a notice from the Transferee requesting such assistance, the Transferor shall pay to the Transferee as liquidated damages an amount equal to 10% of the portion of the equity transfer price paid by the Transferee, unless the Transferee has already been in breach of this Agreement. Such liquidated damages shall be applied when the Transferee pays the last installment.
2-2-6
The Transferee shall wire transfer the Transfer Payment to the following bank account or other bank account designated by the Transferor:
Receiver:
Zhengzhou Antuo Investment Co., Ltd.
Bank: Bank
of China, Zhengzhou Hi-Tech Development Zone Branch
Bank
Account: 633941250888091001
Article 3 Closing and Transition
3-1
On the date of execution of this Agreement, the Transferee has entered into a
Shareholders Joint Venture and Cooperation Agreement with Shaanxi Power
Construction and has finished the execution of relevant legal documents
including amendment to the Articles of Association of Xi'an Huitian.
3-2
The Transferor should, prior to the closing of the Subject Shares, perform the Obligation to Assist Transferee so as to secure Governmental Authorities' approvals and AIC alteration registration formalities as soon as possible for this equity transfer. If Governmental Authorities and AIC object to anything in this Agreement and requires its revision, the Parties shall negotiate to revise this Agreement and submit the revised Agreement to Governmental Authorities and AIC for approval.
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3-3
The Transferor agrees that the Transferee may hold the equity in entrustment
from the Transition till the Closing, exercise the full powers that Transferor
holds in Xi'an Huitian, and will be entitled to all the revenues from it.
3-4
Both parties should make reasonable efforts to complete the Transition for the
Subject Equity within 30 days of the effectiveness of this Agreement. The
Closing of this equity transfer should be consummated within 30 days of approval
by Government Authorities . After the Closing, the Transferee should enjoy its
rights as a shareholder and fulfill its obligations as a shareholder according
to the law, regulations and the amended Articles of Association of Xi'an Huitian.
3-5
The Transferor is a natural person. To assist the Transferee from time to time in fulfilling its obligations relating to the Closing, the Transferor shall, pursuant to the request of the Transferee, conduct notarization-related engagement with natural persons designated by the Transferee in relation to the registration procedures for this equity transfer.
Article 4
Representations and Warranties of the Transferor
The
Transferor has, pursuant to requests by Transferee and its financial
consultant, auditors and attorneys, provided to the Transferee and its
financial consultant, auditor and attorney accurate and true Data relating to
the transfer of equity interest in Xi'an Huitian, and has not concealed, or
misled the Transferee on, any information relating to Xi'an Huitian. The
Transferor hereby represents and warranties on the Date of Execution as follows,
and if there may be or has been any circumstance beyond the provisions of this
Article 4 at any time between the Date of Execution and the Date of Transition,
the Transferor shall immediately inform the Transferee in writing, and negotiate
with the Transferee for mutual resolution so that the Transferee could seriously
consider if it would still accept the equity transfer.
4-1
Due Organization and Valid Existence
4-1-1
Xi'an Huitian is a limited liabilities company duly organized and lawfully and validly existing according to PRC Law. It has all the necessary capacity and authority for ongoing operation of its current business. The Transferor has prepared and delivered to the Transferee the true and accurate copies of Blood Product Enterprise Operation Permit, Enterprise Legal Person Business License and Articles of Association (collectively hereinafter, the " Xi'an Huitian Constitutional Documents "). Xi'an Huitian has valid constitutional documents, and has been approved by Ministry of Health of the PRC to perform its business in China as a blood product producing enterprise.
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4-1-2
When the Transferor executes and delivers this Agreement or complies with provisions under this Agreement, it will
(1)
not violate any provision of Xi'an Huitian Constitutional Documents; or, in case of any violation, has obtained relevant exemption from liabilities;
(2)
To the extent of the Transferor's knowledge, not violate PRC Law.
In addition, any contract or agreement that has been entered into by the Transferor will not effect the execution of this Agreement by the Transferor or its performance of rights and obligations under this Agreement.
4-2
Equity Interest
4-2-1 The registered capital of Xi'an Huitian is RMB 51,000,000, and there does not exist any third party priority, right of subscription, option or other rights, or court decree, judgment or convertible bonds pursuant to which Xi'an Huitian should increase or decrease its registered capital.
4-2-2 The Transferor holds lawful title to the Equity Interest to Be Transferred. The Transferor has not entered into any agreement with any third Person other than the Transferee for sales of the shares of Xi'an Huitian or for the issuance of new share, or any binding agreement regarding any option or preemptive right. The Equity Interest to Be Transferred is based on valid capital contribution and has full power and right as listed in Xi'an Huitian Constitutional Documents. There exist on the Equity Interest to Be Transferred and the affiliated interests no Security Interests or judicial garnishment or attachment. The Transferor warrants that the Transferee would not be subject to any form of claim.
4-3
Subsidiary
Xi'an Huitian has exactly one following Subsidiary, and only has the following equity interest in the following Subsidiary:
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Xi'an Huitian now solely owns Baishui Huitian Plasmaphoresis Station Co., Ltd. and Fuping Huitian Plasmaphoresis Station Co., Ltd. Ankang Hanbin Huitian Yongdong Plasmaphoresis Station Co., Ltd. has finished its restructuring and established one-on-one plasma supply relationship with Xi'an Huitian, but the investment fund has not been paid and it has not completed AIC registration formalities.
Xi'an Huitian has no other Subsidiary except the above. The Transferor has provided to the Transferee information on equity ownership and business model of the three plasmaphoresis stations.
4-4
Financial Information
4-4-1
The Transferor has delivered to the Transferee the duplicate of reports issued by accounting firm for him as of August 31, 2008 (including balance sheet , profit statement, cash flow statement, reconciliation statement, etc., collectively the " Audited Financial Information "). The Transferor warrants that Xi'an Huitian has no external guarantee, or hidden liabilities or contracts as of September 12, 2008.
4-4-2
Real Estate, Titles to Production Equipment and Security Interests
Xi'an Huitian has good and disposable titles respectively to its owned or leased assets (as to the owned real estate and production equipment) or valid and binding lease interests (as to the leased assets), and there does not exist any Security Interests, judicial garnishment or attachment or any claim by any third party thereon, but not including:
(i)
Security Interests listed in the Audited Financial Information or Non-Audited Financial Information;
(ii)
Security Interests publicly registered in any real estate registration authority.
4-5
Contracts
Except those provided by the Transferor to the Transferee, on September 12, 2008 and the Transition, Xi'an Huitian is not a party to any of the following contract or agreement, nor is it subject to any of the following contract or agreement:
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(1)
Joint venture agreement, partnership agreement, or cooperation agreement entered into with any other Person involving sharing of profits, loss, cost or debt;
(2)
Any agreement entered into outside ordinary course of business after the Date of Execution for the purchase or disposal of the business or assets of Xi'an Huitian, the amount of which exceeds RMB500,000;
(3)
Agreement involving the offer to any Person of preemptive rights to purchase any assets or real estate of Xi'an Huitian, excluding those preemptive rights that are required by PRC Law to be provided to a third party;
4-6
Tax
Except those as listed in the Audited Financial Information, (i) all the tax returns regarding Xi'an Huitian required to be submitted prior to the Date of Execution have been submitted within the time limit according to PRC Law, and (ii) all the due taxes as listed in the relevant tax returns have been fully paid or provided for.
4-7
Intellectual Property and Administrative Approvals
The Intellectual Property and Administrative Approvals held by Xi'an Huitian regarding which the Transferor has provided information to the Transferee is lawfully owned by Xi'an Huitian, and there is no dispute or encumbrances thereon.
4-8
Labor Dispute and Labor Contract
Xi'an Huitian has not been involved in any material pending dispute or actions with its employees or trade union. Xi'an Huitian has provided appropriate labor protection and social security and welfare according to PRC Law for a portion of its employees.
Article 5 Representations and Warranties of the Transferee
The Transferee shall be deemed to have warranted as true, accurate, and not misleading all the Data that have been provided by the Transferee to the Transferor relating to transfer to it of equity interest in Xi'an Huitian. The Transferee hereby represents and warrants on the Date of Execution as follows:
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5-1
Due Organization and Valid Existence
5-1-1 The Transferee is a duly organized and lawfully and validly existing limited liabilities company. It has all the necessary capacity and authority to own its assets and for ongoing operation of its most current business. The Transferee has true and accurate Enterprise Legal Person Business License and Articles of Association (collectively hereinafter, the " Transferee Constitutional Documents ").
5-1-2 When the Transferor executes and delivers this Agreement or complies with provisions under this Agreement, it will
(a) not violate any provision of Business License, Articles of Association or other constitutional documents of the Transferee;
(b) to the extent the Transferee knows, not violate any PRC Law.
(c) any contract or agreement that has been entered into by the Transferee will not impact the Transferee's execution of this Agreement or its performance of obligations under this Agreement.
(d)
this Agreement is binding on the Transferee from its formation.
5-2
Financial Capability
The Transferee warrants that it has the capability to pay all the Transfer
Payment to the Transferor, and has reserved sufficient fund to pay the Transfer
Payment according the terms and conditions of this Agreement.
Article 6 Covenants of
Transferor
Except the liabilities otherwise specified herein, Transferor hereby further covenants as follows:
6-1 Unless Transferor acquires the prior written consent from Transferee, Transferor, as the shareholder of Xi'an Huitian, shall perform the following obligations from the Date of Execution to the Date of Transition:
6-1-1
To cause Xi'an Huitian to do business in the normal situation as it used to;
12
6-1-2
To cause Xi'an Huitian to take all the reasonable measures to protect its commercial reputation and maintain the relationship with its clients and suppliers, and not to conduct any act which will damage its commercial reputation;
6-1-3
To ensure that Xi'an Huitian will not conclude or make any contracts or commitments beyond its general or normal business scope which may have material effect on its assets, liabilities or current business;
6-1-4
To ensure that Xi'an Huitian will not declare any dividend or make any distribution on its capital or profits;
6-1-5
To ensure that Xi'an Huitian will not withdraw or pay any amount of cash to Transferor and its Affiliated Party in the form of management fee or in any form beyond its normal business scope;
6-2 Before the Date of Transition, Transferor will assist Xi'an Huitian to maintain or acquire any governmental approval, license, permit, consent or registration which are necessary for Xi'an Huitian's operation.
6-3 Before the Date of Transition, Transferor will assist Xi'an Huitian to maintain or apply for all the tax preferences or preferential treatment which may be enjoyed or will be enjoyed by Xi'an Huitian under PRC Laws.
Article 7 Covenants of Parties
7-1
Confidentiality . Unless it is superseded by the similar agreements between both parties, the existence of this Agreement and the terms and conditions of this Agreement shall be kept secret and confidential, except information or material which shall be submitted to Government Authorities or Approval Authorities under the PRC laws or regulations and information which shall be disclosed under PRC and US laws or regulations. Disclosing party shall give two (2) days' notice to the other party herein before the disclosure.
7-2
Notice . During the period from the Date of Execution to the Date of Closing, Transferor shall notify Transferee any matter or situation which, to the extent of the Transferor's knowledge, will cause, or, under reasonable situations, may cause inaccuracy in Transferor's representations and warranties under Article 4 herein. During the period from the Date of Execution to the date that Transferee pays all the Transfer Price, Transferee shall notify Transferee any matter or situation which, to the extent of the Transferor's knowledge, will cause, or, under reasonable situations, may cause inaccuracy in Transferee's representations and warranties under Article 5 herein.
13
7-3
Management during Transition Period . Entrusted management will be implemented during the transition period from the Date of Execution to the Date of Closing, that is, after Transferor receives from Transferee the second installment of RMB 12,000,000, Transferor shall entrust all the Subject Equity Interests to Transferee, and Transferee will dispatch management staff who will replace the management staff appointed by Transferor subject to the powers set forth in the constitutional documents of Xi'an Huitian. Transferor agrees that Transferee will exercise all the powers of Transferor in Xi'an Huitian. Upon Transferor's receiving the second installment paid by Transferee, this Agreement will be regarded as an Entrustment Agreement and will be performed immediately; it will be fully implemented within five (5) Business Days. Transferee may request a notary public office to make a notarization of the entrustment, and Transferor will give its fullest cooperation.
7-4
Recourse . Within two years after Transferee fully takes over the rights and interests of Xi'an Huitian previously held by Transferor, if it finds any Contingent Liabilities that arose before September 12, 2008 and was unknown to Transferee before the Date of Transition, Transferee will have the right to claim against Transferor after paying the Transfer Price.
Article 8 Expenses and
Tax
8-1
The transaction charges, including the registration fee for the equity transfer, will be subject to the relevant national regulations and paid by both parties respectively.
8-2
The charges caused by equity transfer approval and the relevant public notice will be paid by the parties that have incurred such charges.
8-3
The service fees for intermediaries, including financial consultants, auditors or attorneys, relating to this equity transfer, will be determined by negotiation between both parties if they are hired by both parties, or paid by each engaging party if they are engaged separately.
14
8-4
The taxes related to this equity transfer will be reported and paid to the relevant tax authority by each party. Transferor, Transferee and Xi'an Huitian will not be responsible for withholding taxes for any other party. If failure by any party to pay the taxes according to the PRC Laws causes negative impact on any other party, the other parties so impacted will be entitled to damages from the responsible party.
Article 9 Non-assignment
Without the prior written consent by both parties, neither Transferor nor Transferee shall allocate or assign any rights and obligations under this Agreement. However, each party entitled to assign all or part of its rights and obligations to the Affiliated Party it designates, if necessary, provided that both such parties shall be jointly and severally liable for their obligations hereunder.
Article 10 Notice
10-1
Any notice issued according to this Agreement will be written in Chinese in advance and may be delivered in person, by registered mail or facsimile to the other party.
10-2
Unless a fifteen (15) days' advance notice in writing is given to the other party, addresses of both parties are as follows:
Transferor
Fan Qingchun
Address:
Jiaozuo Antuo Co. Ltd
New Businesses Park, Hi-Tech Development Zone
Jiaozuo City, Henan
Postcode:
454003
Telephone:
0391-3966136
Fax:
0391-3966136
15
Transferee
Shandong
Taibang Biological Products Co., Ltd
Address: No.
14 Hushandong Road, Tai'an City, Shandong Province
Postcode:
271000
Telephone:
0538-6217079
Fax:
0538-6206636
Contact:
Zhao Chaoming
10-3
Both parties may notify other party and Xi'an Huitian in writing of change of address .
Article 11 Liability for Breach
11-1
Both parties hereby agree that if (i) one party breaches any representations and warranties herein; or (ii) one party breaches any covenant or stipulation herein (other than those breaches for which waiver has been given by the non-breaching party), which directly or indirectly cause any damage, claim, loss, legal action, lawsuit, penalty or other reasonable charges or expenses (including reasonable attorney fees) (collectively "Relevant Losses"), the breaching party shall indemnify and hold harmless the other party.
11-2
Transferee will pay the entire Transfer Price to Transferor according to this Agreement. If Transferee fails to make the payment as scheduled, Transferee is deemed to be in breach of this Agreement, and Transferee will pay to Transferor liquidated damages pursuant to this Agreement, except where Transferor has already breached this Agreement.
11-3
Transferor will perform all the obligations, representations and warranties according to this Agreement. Transferor will handle legal procedures and entrustment procedures related to this equity transfer in accordance with the schedule set forth in this Agreement. If Transferor fails to complete the procedures due to its own reason, Transferor is deemed to be in breach of this Agreement, and Transferor will pay to Transferee liquidated damages pursuant to this Agreement, except where Transferee has already breached this Agreement .
Article 12 Settlement
of Disputes and Governing Law
Any dispute arising out of or related to this Agreement shall be settled by friendly negotiation by both parties hereby. If no resolution is attained through friendly negotiation, any party may bring a legal action at the competent court for the location where this Agreement is executed. The execution, effectiveness, interpretation, performance, enforcement, amendment and termination of this Agreement will be governed by the laws of the PRC.
16
Article 13 Termination and Rescind of Contract
13-1
This Agreement will be effective upon the execution. No parties may terminate this Agreement unilaterally.
13-2
This Agreement will be terminated under the following situations:
13-2-1 Transferor and Transferee reach a written agreement to terminate this Agreement;
13-2-2 any material breach by any Party makes it impossible for this Agreement to be performed, and this Agreement is terminated after both Parties enter into an agreement for termination
13-3
If either Transferor or Transferee terminates this Agreement according to Article 13-1 herein, this Agreement will cease to be effective upon the date of its termination, and no party will be liable to the other party and its Affiliated Party, directors, management officers or employees, except for the obligations between both parties as set fort in the following provisions: Confidentiality, Notice, Settlement of Disputes and Governing Law. In addition, this provision will not release any party from liabilities for breaches and due obligations that arise prior to the termination of this Agreement.
Article 14 Counterparts
and Integration
This
Agreement will be made in eight counterparts; each party will hold two of them,
and certain copies will be submitted to the relevant authorities. Each
counterpart has the same legal effect.
Article 15 Waiver
Unless
otherwise specified, no failure or delay by any party to exercise any right,
power or privilege under this Agreement will operate as a waiver of any such
right, power or remedy. Any separate or partial exercise of any right, power or
privilege will not impede the exercise of any other right, power or privilege.
17
――Signature Page――
IN WITNESS WHEREOF, both parties have executed this Agreement on October 10, 2008 in Xi'an.
Transferor: Fan Qingchun
Authorized Representative (signature):______________________________
Transferee: Shandong Taibang Biological Products Co., Ltd
Legal Representative or Authorized Representative (signature):______________________________
18
THELEN TRANSLATION (10-10-2008)
List of Exhibits to the Agreement
Exhibit 1 Audit Reports and Appraisal Reports
1、Audit Report for 2005（Shan Hua Shen Zi［2006］NO.230）
2、Audit Report for 2006（Zhong Xing Hua Shen Zi［2007］No.005）
3、Audit Report for 2007（Zhong Xing Zheng Xin Shen［2008］NO.010189）
4、Audit Report for January to August 2008（Zhong Rui Yue Hua Shan Zhuan Shen
Zi［2008］No 003）
5. Shan Hua Xi Ping Bao Zi (2007) No.14
6. Shan Zhong Heng Xin Kuai Shi Ping Zi (2008) No. 004
Exhibit 2 Real Estate, Titles to Production Equipment and Security Interests
1、Property Ownership Certificate (Xi'an City Property Ownership Certificate Gao
Xin Qu Zi No. 107510601-10-2)
2、Property Ownership Certificate (Xi'an City Property Ownership Certificate Gao
Xin Qu Zi No. 107510601-10-1)
3、Right of Land Use Certificate (Xi Gao Ke Ji Guo Yong (2000) No. 37702)
Exhibit 3 A List of Intellectual Properties and Administrative Approvals
1、GMP Certificate H3934（scope of certification: blood products）
2、Medicine Production License - Shaan S20060157（production scope: blood
products; Expiration Date: December 31, 2010）
3、Trademark Registration Certificate NO.1375266（HUITIAN Word-Trademark）
4.
Trademark Registration Certificate NO.1375264（"回天" Word-Trademark）
5、Trademark Registration Certificate NO.1383464（Image mark）
6、Approvals for Production
（1）Human Serum Albumin (HSA) 20％ 10g/bottle, Guo Yao Zhun Zi SF19990034
（2）Human Serum Albumin (HSA) 20％ 2g/bottle, Guo Yao Zhun Zi SF19990036
（3）Human Serum Albumin (HSA) 20％ 5g/bottle, Guo Yao Zhun Zi SF19990035
（4）Human Intravenous Immunoglobulin（pH4）1.0g/bottle, Guo Yao Zhun Zi SF20010059
（5）Human Intravenous Immunoglobulin（pH4）1.25g/bottle, Guo Yao Zhun Zi SF20010056
（6）Human Intravenous Immunoglobulin（pH4）10.0g/bottle, Guo Yao Zhun Zi SF20020055
（7）Human Intravenous Immunoglobulin（pH4）2.5g/bottle, Guo Yao Zhun Zi SF20010057
（8）Human Intravenous Immunoglobulin（pH4）5.0g/bottle, Guo Yao Zhun Zi SF20010058
（9）Human Normal Immunoglobulin 150mg/bottle, Guo Yao Zhun Zi SF20010054
（10）Human Normal Immunoglobulin 300mg/bottle, Guo Yao Zhun Zi SF20010053
19
Exhibit 10.2
Joint Venture and Cooperation Agreement between Shareholders
Party A: Shaanxi Power Construction
Corporation
Party B: Shandong Taibang Biological Products Co., Ltd
Whereas, Party A entered into a Joint Venture and Cooperation Agreement between Shareholders with FAN Qingchun ("Transferor") on November 8, 2005 for purpose of joint acquisition of 68% equity interest held by Jiao Da Rui Shen in Huitian Blood Products Co., Ltd. ("Huitian"). After the acquisition, Party A held 65% of the equity interests in Huitian, while the Transferor held 35% of the equity interests in Huitian. After registration of the equity transfer with the administration for industry and commerce, both Parties have been jointly operating Huitian till now. In July 2008, the Transferor proposed to transfer 35% of the equity interests it held in Huitian due to its own reasons and recommended Party B as the Transferee.
Whereas, the Transferor claims that the equity interest transfer will conflict with the provisions of the Joint Venture and Cooperation Agreement between Shareholders and the articles of association of Huitian, Party A and FAN Qingchu has entered into an Agreement for Termination of the Joint Venture and Cooperation Agreement between Shareholders.
Whereas, Party A agrees to Party B becoming a shareholder, waives its preemptive rights to purchase the equity interests to be transferred, and agrees that Party B may negotiate and enter into an equity transfer agreement with the Transferor.
In accordance with the Company Law of the People's Republic of China, the Contract Law of the People's Republic of China, in respect of the acquisition of equity interests of Huitian and cooperation between shareholders, Party A and Party B have agreed as follows:
I.
Equity Acquisition
1.
Party A agrees that Party B may acquire 35% of the equity interests in Huitian and become a shareholder in Huitian on condition that Party B shall maintain Huitian's long-term stability and development.
2.
Party B agrees to keep fair and transparent the Transfer Price, the appraised assets value, method of transaction as well as the payment of the Transfer Price for the equity interest to be acquired and to provide the equity transfer agreement to Party A.
3.
Party A and Party B will hold 65% and 35% of the equity interest in Huitian respectively and become the only two shareholders of Huitian after the equity transfer between Party B and the Transferor has been completed.
II.
Principles for Cooperation
Party B will exercise and enjoy corresponding rights as a shareholder according to the stipulations after the conclusion of this Agreement and the equity transfer agreement. In terms of the cooperation, both Parties have agreed as follows in accordance with the Company Law of the People's Republic of China:
1
1.
Party A and Party B will hold 65% and 35% of the equity interest in Huitian, respectively, and correspondingly undertake liabilities and allocate profits according to the capital contribution ratio.
2.
For purpose of stability, neither Party may, within five years after conclusion of this Agreement, propose to transfer the equity interest to any Person other than the existing shareholders, and after such period such Party shall have preemptive rights to purchase the equity interest that is intended to be transferred by the other shareholder.
3.
The board of directors of Huitian shall have five members, among which three shall be appointed by Party A and two shall be appointed by Party B. Furthermore, the board of supervisors of Huitian shall have three members, among which one shall be appointed by Party A, one shall be appointed by Party B and one shall be representative of employees. Directors and supervisors shall be recommended by the shareholders, while the employee supervisor shall be recommended by the employees, and all directors and supervisors shall be elected by the shareholders' meeting.
4.
The chairman of board of directors of Huitian shall be one of the directors recommended by Party A, shall be elected by the board of directors and shall be the legal representative of Huitian. The chairman of board of supervisors of Huitian shall be one of the supervisors recommended by Party A and shall be elected by the board of supervisors.
5.
Huitian adopts a General Manager responsible system under the leadership of the board of directors. The management of Huitian shall be consist of five members, among which three shall be recommended by Party A and two shall be recommended by Party B. The General Manger shall be engaged by the board of directors, while the other members of the senior management shall be engaged by the board of directors according to nominations by the General Manager.
6.
The shareholder of Huitian shall exercise voting rights in the shareholders meeting according to its capital contribution ratio and no resolution of shareholders' meeting shall be adopted unless a majority of the votes are in favor of it. However, resolutions by the shareholders' meeting regarding amendment of the articles of association, increase or decrease of registered capital, corporate consolidation, split, termination or restructuring, outbound investment, guarantee and issuance of bonds shall be adopted by shareholders having at least two thirds (2/3) of the voting rights.
7.
Each director shall have one vote on the resolution of the board of directors of Huitian. The resolution of the board of directors of Huitian shall not be effective unless more than half of the directors vote in favor of it. The following resolutions shall not be effective unless they have had affirmative votes from more than 2/3 of the directors of the board of directors:
7.1
Hiring or dismissing senior management, such as General Manager, Chief Financial Officer, Deputy General Manager, etc.
7.2
Providing mortgage and guarantee with company's assets, and other matters involving security of company's assets.
2
8.
In regards to the above-mentioned cooperative terms, Party A and Party B will, on a timely basis, convene shareholders' meeting, amend the articles of association of Huitian, recommend directors and supervisors according to the stipulations by the articles of association, convene meetings of the board of directors and the board of supervisors, and hire General Manager and other senior management according to the stipulations by the articles of association.
III. Covenants by Both Parties
1.
Party B has already conducted appraisal of the assets of Huitian before the transfer of the equity interest by the Transferor and has already known the general business, financial and operation situation of Huitian. Party B and the Transferor have already agreed on the Transfer Price and method of payment thereof. Any contractual disputes shall be resolved between Party B and the Transferor without injuring the rights of Party A in Huitian and the rights of Huitian for any reasons.
2.
Considering Party B has relative technical strength and rich management experience in biologic products industry, Party B warrants that the execution of the equity transfer agreement with the Transferor and the cooperation with Party A are manifestation of its true intention and it will perform the following duties as a shareholder:
2.1
Provide technical support to Huitian to the extent permitted by laws and regulations, provide abundant human resources to procure Huitian to accomplish the GMP renovation, new products research and development, and provide comprehensive support on the products which Party B owns while Huitian does not own so as to procure Huitian to expand its product categories.
2.2
Provide without reservation to Huitian management experience that it has accumulated through years, periodically or irregularly organize work exchanges between Huitian and Party B so as to optimize Huitian's management.
2.3
Coordinate with Party A and Huitian to maintain good public relations with governmental authorities, industrial regulators and industrial associations so as to maintain a good public image.
2.4
The assigned employees (including senior management) are Party B's main technical and management officers who shall have competence for the respective positions in Huitian. If they are not competent for Huitian's positions, Party A is entitled to request replacement till its satisfaction.
3.
Party A covenants to assist Party B to go through the formalities for AIC alteration registration after the completion of transfer of equity interest and to complete the reelection and engagement of the board of directors, the board of supervisors and senior management as soon as possible.
4.
Party A covenants to abide by the Company Law of the People's Republic of China and the articles of association of Huitian and cooperate with Party B to promote sustained and healthy development of Huitian. Both Parties agree to conduct communications in advance of material matters or decisions, agree with the current working guidelines, will improve the legal
person governance structure of Huitian, and will establish operation and management structures in compliance with GMP criteria and market economy requirements for purpose of win-win results.3
5.
The human resources management of Huitian will follow the principle that the positions shall be established according to needs and employment decisions shall be made on the basis of merit. The employees assigned by both Parties shall be appointed according to the needs of positions. The current mid-level and senior-level managements assigned by Party A shall be maintained stable, while Party B's appointees may fill in positions on a supplementary basis.
IV.
Liabilities for Breach of Contract
This Agreement shall take effect immediately after execution by the representatives of Party A and Party B. Both Parties shall strictly abide by this Agreement. The breaching Party shall bear the liabilities for breach of contract, shall pay liquidated damages of RMB one million to the non-breaching Party and further compensate the non-breaching Party for relevant losses.
V.
Miscellaneous
1.
The remuneration standards for the management staff above the mid level assigned by Party A and Party B shall be set according to the rules of Huitian. (The remuneration of the employees assigned by Party A and Party B shall be set by referring to the standards for the employees in comparable positions in Party A and Party B.) The payment for social insurance and public housing fund for the employees assigned by Party A and Party B shall be made by Huitian after being reviewed by social security authorities according to the standards where Party A and Party B are located respectively.
2.
Party A, Party B and the Transferor shall enter into a three-party agreement to specify the issues arising between the execution of this Agreement and the completion of the transfer of equity interest and AIC registration of the transfer.
3.
This Agreement is made in eight original sets. Each Party shall hold four original sets which shall be equally authentic.
4.
The appendices to this Agreement include (1) the documents issued by the shareholders' meeting (or board of directors) of Party B approving the purchase of equity interest; (2) the documents issued by Party A approving the transfer of equity interest and waiving the preemptive rights to purchase the equity interest to be transferred; and (3) the documents issued by the shareholders' meeting of Huitian approving the equity transfer.
Party A: Shaanxi Power Construction Corporation (with seal
attached)
/s/ Signature of legal representative or authorized representative
Party B: Shandong Taibang Biological Products Co., Ltd (with
seal attached)
/s/ Signature of legal representative or authorized representative
Date of Execution: September 12, 2008.
4
Exhibit 10.3
Agreement on Equity Transfer, Acquisition, Joint Venture and Cooperation
Party A: Shanxi Power Construction
Corporation
Party B: FAN Qingchu
Party C: Shandong Taibang Biological Products Co., Ltd
Whereas, Party B has proposed to transfer 35% of equity interest it holds in Huitain Blood Products Co., Ltd. ("Huitian"), and after Party A's consent, Party A and Party B entered into the Agreement for Termination of the Joint Venture and Cooperation Agreement between Shareholders, according to which Party A agreed to Party C purchasing the 35% of equity interest Party B holds in Huitian and to Party B and Party C entering into equity transfer agreement (this Agreement shall prevail in case of any discrepancy). According to the relevant provisions by the agreement among the Parties, the Parties have agreed as follows in regards to the relevant issues:
1.
Before the execution of all the agreements, the Parties shall provide the following documents as the conditions that these agreements will take effect: (1) opinions of Party B regarding the equity transfer; (2) documents issued by the shareholders' meeting (or board of directors) of Party C approving the acquisition of equity interest; (3) the documents issued by Party A approving the transfer of equity interest and waiver of preemptive rights to purchase the equity interest to be transferred; (4) the documents issued by the shareholders' meeting of Huitian; and (5) the warrant letter issued by Party B to Party A.
2.
Considering the above terms and conditions, Party A, Party B and Party C shall endeavor to perform its duties and complete the agreed tasks as soon as possible after conclusion of this Agreement.
3.
Huitian is engaging in updating and renovations according to GMP (new standards). In order to maintain the continuity of these work, Party B covenants to provide on-site assistance and coordinate to complete internal inspection and special examination during the periods for renovation, project completion and launching of production, so as to assure the project can be put into production smoothly.
4.
The period after conclusion of this Agreement and before the completion of the AIC alteration registration is the transitional period, for which period it is agreed as follows:
4.1
Party C will enjoy corresponding rights in Huitian which Party B enjoyed after Party C pays the first installment of the Transfer Price according to the terms and conditions specified by the equity transfer agreement. Party A and Party C will then convene the shareholders' meeting to discuss the amendment of the articles of association and reelection of the board of directors and the board of supervisors. Party A and Party C shall provide before the meeting lists of the directors and supervisors to be appointed by them to Huitian and their resumes.
4.2
The reelected board of directors should engage the General Manager and other senior management by a vote of more than 2/3 directors. Considering that Huitian is in the process of GMP renovation period, the General Manager appointed by Party B will continue to perform its duties on GMP alteration, quality control and blood plasma management until the GMP renovation is completed and the project is officially put into production (for a period not exceeding three months), and the candidate General Manager appointed by the board of directors will assume responsibility for the other duties of the General Manager.
1
4.3
Party A, Party B, Party C and Huitian are responsible for providing the documents necessary for respective AIC alteration registration and completing the respective formalities within the time limit specified by the State.
4.4
During the Transitional Period, material matters such as execution and distribution of material documents, execution of material contracts, use of large amounts of capital (more than RMB 100,000), arrangement of important projects, employees hire and dismissal, etc. shall not be implemented unless the legal representative of the company has consented to it. Meanwhile, any outbound investment or provision of guarantee by Huitian will be subject to consent of Party C.
5.
Liabilities for Breach of Contract:
This Agreement shall take effect immediately after execution by the representatives of Party A, Party B and Party C. Party A, Party B and Party C shall strictly abide by this Agreement. The breaching Party shall bear the liabilities for breach of contract, shall pay liquidated damages of RMB one million to the non-breaching Parties and further compensate the non-breaching Parties for respective losses.
6.
Miscellaneous
6.1
This Agreement is made in 12 original sets. Each Party shall hold four original sets. This Agreement shall take effect after being signed and attached seals.
6.2
The appendices to this Agreements include:
(a)
(1) opinions of Party B regarding the equity transfer; (2) documents issued by the shareholders' meeting (or board of directors) of Party C approving the acquisition of equity interest; (3) the documents issued by Party A approving the transfer of equity interest and waiver of preemptive rights to purchase the equity interest to be transferred; (4) the documents issued by the shareholders' meeting of Huitian; and (5) the warrant letter issued by Party B to Party A.
(b)
(1) equity transfer agreement between Party B and Party C; (2) Agreement for Termination of the Joint Venture and Cooperation Agreement between Shareholders; and (3) the Joint Venture and Cooperation Agreement between Party A and Party C.
(c)
the Articles of Association of Party C.
2
Party A: Shaanxi Power Construction Corporation (with seal
attached)
/s/ Signature of legal representative or authorized representative
Party B:
/s/ FAN Qingchu
Party C: Shandong Taibang Biological Products Co., Ltd (with
seal attached)
/s/ Signature of legal representative or authorized representative
Date of Execution: September 12, 2008
3
Exhibit 10.4
Agreement
Party A: Logic Express Ltd.
Party B: Shandong Biological Products Research Institute
Party C: Shandong Taibang Biological Products Co., Ltd.
The above three Parties agree that Party A entrusts Party C for investment in Xi'an Huitian Blood Products Co., Ltd. ("Huitian"). According to the principles of good faith, equality and mutual benefits, equivalence and voluntariness, after full consultation the three Parties agree as follows in regards to relevant issues:
1.
Party A entrusts Party C to invest in Huitian (i.e. to acquire 35% of the equity interest in Huitian). All the investment capital involved in this acquisition shall be procured by Party A on its own, while actual acquisition procedures shall be performed in the name of Party C.
2.
After commencement of acquisition, Party A shall responsible for handling all the investment in Huitian and its daily operation and management; all the incurred costs, fees, liabilities, losses, rights and profits, and all the human resources, assets and properties involved by Huitian shall be borne or enjoyed by Party A. Party C shall perform relevant tasks according to Party A's instruction. Without consent of Party A, Party C shall not exercise any right of management or investment return in Huitian.
3.
Party A provide security interests to Party C with all its equity interest Party A holds in Party C for any possible losses caused by such entrusted investment. The amount of such losses shall be based on the appraisal results produced by an appraiser chosen by all three Parties. In the event that such entrusted investment has caused losses to Party C, Party A shall reimburse Party C immediately in cash. In case Party A fails to reimburse Party C in time, Party C is entitled to dispose of the equity interest which Party A holds in Party C in the amount of respective loss and claim for the costs incurred for disposal of such equity interest. The equivalent value of the equity interests shall be based on the appraisal results produced by the appraiser chosen by both Parties.
4.
If Party A intends to make available to Huitian any resource of Party C, Party A shall obtain consent of Party B to such provision.
5.
Party A shall pay Party C RMB 120,000 each year as entrustment consideration so as to enable Party C to conduct relevant business.
6.
When the conditions are mature, Party A shall transfer the equity interest which Party C holds in Huitian to Party A or other affiliated companies of Party A as soon as possible, for which Party C shall unconditionally cooperate.
7.
Party A may lawfully use dividends distributed to it from Party C to pay the investment capital. If Party A needs to borrow from Party C, it shall have consent of Party B and pay interests according to benchmark interest rates for bank loans for the same period. In case Party A owes any arrearages to Party C, dividends distributed to Party A from Huitian and any price paid for equity transfers shall be applied on a priority basis to repay Party C.
1
8.
This conclusion, validity, interpretation, implementation, enforcement, amendment and termination shall be governed by PRC law. Any disputes arising from the performance of this Agreement shall be resolved according to the means of disputes resolution specified in the joint venture contract of Shandong Taibang Biological Products Co., Ltd.
9.
This Agreement is made in three original sets. Each Party shall hold one original set.
Party A: Logic Express Ltd. (with seal
attached)
/s/ Signature of representative
Party B: Seal Shandong Biological Products
Research Institute (with seal attached)
/s/ Signature of representative
Party C: Seal Shandong Taibang Biological Products Co., Ltd (with seal attached)
Date of Execution: September 12, 2008.
2
Exhibit 99.1
| Company Contact: | Investor Relations Contact: |
| Mr. Y. Tristan Kuo | Mr. Crocker Coulson |
| CFO | President |
| China Biologic Products, Inc. | CCG Investor Relations |
| Tel: +86-538-6202206 | Tel: +1-646-213-1915 (NY office) |
| Email: IR@chinabiologic.com | Email: crocker.coulson@ccgir.com |
| www.chinabiologic.com | www.ccgir.com |
For Immediate Release
China Biologic Products Enters Into Agreement to Acquire 35%
Interest in Xi'an Huitian Blood Products Co., Ltd. And Introduces
Preliminary Guidance for 2009
Taian City, Shandong Province, PRC
– October 16, 2008 – China Biologic Products, Inc. (CBPO.OB) ("China Biologic" or the "Company"), one of the leading plasma-based pharmaceutical companies in the People's Republic of China ("PRC"), announced that on October 10, 2008, its indirect majority owned subsidiary, Shandong Taibang Biological Products Co., Ltd. ("Taibang"), entered into an agreement to acquire 35% of the equity interest in Xi'an Huitian Blood Products Co., Ltd. ("Huitian"), a biopharmaceutical company based in Xi'an, Shaanxi Province from Mr. Fan Qingchun (the "Shareholder"), a PRC citizen, for an aggregate purchase price of RMB 44,000,000 (approximately $6.44 million). The transaction is expected to be completed within two months.Expected benefits of the acquisition include:
"We are excited about the potential of this acquisition to further strengthen our position in the plasma-based biopharmaceutical industry in China. Following our recently announced transaction to acquire a 90% controlling interest in Chongqing Dalin Biologic Technologies Co. Ltd. ("Dalin"), this will transform China Biologic into the largest non-state-owned producer of plasma based products in China," said Mr. Chao Ming Zhao, CEO of China Biologic Products. "We plan to supply technical support to Huitian for its renovation, strengthen its research and development program and provide the management expertise to grow the business. We believe the two acquisitions position China Biologic to significantly grow our revenues and profitability in 2009, while affording us the ability to increase our supply of plasma and achieve higher utilization levels over time across our expanded geographic platform."
Huitian is the only biopharmaceutical manufacturer in Shaanxi Province, which has a population of 37 million. Huitian produces about 80 tons of plasma-based products per year and has 200 tons of annual production capacity. China Biologic believes that Huitian currently has approximately 1.2% market share in China, which would result in a combined market share of approximately 17% if the recently announced Dalin acquisition is included. The top 6 largest plasma-based biopharmaceutical companies in China have a total market share of approximately 50%.
Huitian is one of the 32 government approved plasma-based product producers in China, and it is in compliance with Good Manufacturing Practices ("GMP") standards. It is also approved by the PRC's State Food and Drug Administration ("SFDA") to produce four types of plasma-based products including Human Albumin, Human Immunoglobulin, Human Immunoglobulin for Intravenous Injection, and Human Hepatitis B Immunoglobulin.
Huitian currently owns three out of the four plasma collection stations in Shaanxi Province that have passed government standards, yielding approximately 80 tons of plasma supply per year. Shaanxi Province historically has had a high collection volume with approximately ten plasma collection stations in operation, collecting approximately 300 tons of plasma supply each year. Management believes Huitian's plasma supply in Shaanxi Province has strong long-term growth potential.
China Biologic will fund Taibang's acquisition of the 35% interest in Huitian. China Biologic believes that it will be able to secure the large majority of the financing required for the two acquisitions from domestic bank facilities and available cash resources. Taibang's other shareholder, Shandong Institute of Biological Products, who owns approximately 17% of Taibang, contractually agreed with China Biologic's wholly-owned subsidiary, Logic Express, to allocate to Logic Express all of the economic benefits (i.e., revenues and net income) and burdens (i.e., expenses, losses and liabilities) of the 35% interest in Huitian that will be acquired by Taibang. Shandong Institute of Biological Products will not contribute any amounts toward the financing of Huitian. The remaining 65% interest in Huitian is owned by Shaanxi Power Construction Group Corporation ("SPCGC") in China, a power construction company in Shaanxi Province. According to the terms of the contract, both parties have agreed not to sell their equity interests in Huitian to a third party within the next five years, giving each other the right of first refusal thereafter. China Biologic plans to expand Huitian's plasma collection capacity in Shaanxi Province and eventually acquire the remaining interest from SPCGC if such opportunity exists.
Company Updates Business Outlook
Management expects that the acquisitions of Dalin (Qianfeng) and Huitian will accelerate the Company's geographical expansion, diversify its customer base, enhance its technological capabilities or competitive advantages and serve to fulfill its planned expansion into the leading biopharmaceutical company in China. China Biologic has targeted combined revenue for 2008 to be in the range of $48 million to $50 million and combined net income to be between $9 million to $10 million, including only a portion of the 4 th quarter operations from the two acquisitions. Assuming the full year consolidation of the two acquisitions, management estimates revenues for 2009 will be in the range of $90 million to $100 million with net income between $18 million to $22 million. Management will continue to evaluate the potential synergies that may emerge from the two acquisitions.
"We are pleased to announce this second significant acquisition. We believe this acquisition, in addition to the previously announced acquisition of Qianfeng, will further increase our plasma supply, diversify our customer base, expand our geographic reach and enable us to benefit from economies of scale," said Mr. Tung Lam, CEO of Shandong Taibang Biological Products. "We are building a strong high-technology, biopharmaceutical franchise in China. Our products remain in great demand and are critical in saving lives. Therefore, we believe our company is insulated from economic cycles and in the long-term our shareholders will be rewarded."
About China Biologic Products, Inc.
Through its indirect majority-owned subsidiary Shandong Taibang Biological Products Co. Ltd., China Biologic Products, Inc. (the "Company"), is principally engaged in the research, development, production and manufacturing and sale of plasma-based biopharmaceutical products to hospitals and other health care facilities in China. The Company's human albumin products are mainly used to increase blood volume and its immunoglobulin products are used for the treatment and prevention of diseases.
Safe Harbor Statement
This release may contain certain "forward-looking statements" relating to the business of China Biologic Products, Inc. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the impact of the acquisition of Xi'an Huitian Blood Products Co., Ltd.; the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; statements about expected future revenues and earnings; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
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