Share Transfer And Debt Restructuring Agreement

EXHIBIT 10.4


[EXECUTION VERSION]


SHARE TRANSFER AND DEBT RESTRUCTURING AGREEMENT


RELATING TO


BEIJING WANWEI PHARMACEUTICAL CO. LTD.


BETWEEN


BEIJING WANHUI PHARMACEUTICAL GROUP


AND


BEIJING MED-PHARM CORPORATION


DATED DECEMBER 15, 2004


CONTENT


CLAUSE PAGE - ------ ---- RECITALS................................................................................................... 1


ARTICLE 1 SHARE TRANSFER.................................................................................. 2


ARTICLE 2 DEBT RESTRUCTUING AND CONSIDERATRION FOR THE SHARE TRANSFER..................................... 4


ARTICLE 3 ARRANGEMENTS DURING TRANSITION PERIOD........................................................... 8


ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDETAKINGS..................................................... 8


ARTICLE 5 EFFECTIVENESS AND TERMINATION................................................................... 11


ARTICLE 6 FORCE MAJEURE................................................................................... 12


ARTICLE 7 BREACH OF CONTRACT.............................................................................. 12


ARTICLE 8 DISPUTE RESOLUTION.............................................................................. 13


ARTICLE 9 GOVERNING LAW................................................................................... 14


ARTICLE 10 NOTICES......................................................................................... 14


ARTICLE 11 MISCELLANEOUS PROVISIONS........................................................................ 14


SIGNATURE PAGE............................................................................................. 16


SCHEDULE 1................................................................................................. 18


SCHEDULE 2................................................................................................. 22


SCHEDULE 3A................................................................................................ 23


SCHEDULE 3B................................................................................................ 24


SCHEDULE 3C................................................................................................ 25


SCHEDULE 3D................................................................................................ 26


SCHEDULE 4................................................................................................. 28


SCHEDULE 5................................................................................................. 38


SCHEDULE 6................................................................................................. 39


SCHEDULE 7................................................................................................. 44


SCHEDULE 8................................................................................................. 51


SHARE TRANSFER AND DEBT RESTRUCTURING AGREEMENT


This Share Transfer and Debt Restructuring Agreement (this "AGREEMENT") is made in Beijing on December 15, 2004 by and between:


(1) BEIJING WANHUI PHARMACEUTICAL GROUP ("WANHUI GROUP"), a wholly state owned
enterprise organized and existing under the laws of the People's Republic
of China (the "PRC"), with its domicile at No. 129, Xuanwumen Xi Da Jie,
Xicheng District, Beijing, legal representative being Zhaoyi Wang;


(2) BEIJING MED-PHARM COPORATION ("BMP"), a corporation organized under the
laws of the State of Delaware, the United States, with its domicile at
1180 Main Street, Coventry, CT 06238, legal representative being Xiaoying
Gao (Title: Chief Executive Officer and President; Nationality: USA).


Wanhui Group and BMP hereinafter individually referred to as a "PARTY" and collectively referred to as the "PARTIES".


RECITALS


(1) WHEREAS, Beijing Wanwei Pharmaceutical Co., Ltd. (the "COMPANY") is a
limited liability company established under the laws of the PRC, with its
registered capital being RMB5,880,000.00 yuan. Wanhui Group holds 80% of
its equity interests, and Wen Xinholds the remaining 20%;


(2) WHEREAS, meanwhile Wanhui Group is a creditor of the Company. Since the
Company is not able to discharge its indebtedness due and payable to
Wanhui Group, Wanhui Group wishes to restructure the debt of the Company
pursuant to the terms and conditions of this Agreement with the
participation of BMP and to transfer its equity interests in the Company
to BMP;


(3) WHEREAS, BMP agrees to acquire Wanhui Group's equity interests in the
Company and to participate in the debt restructuring of the Company as per
the terms and conditions of this Agreement;


(4) WHEREAS, BMP has entered into a Share Transfer Agreement with Wen Xin, the
other shareholder of the Company, on the date hereof to acquire [name of
the other shareholder of the Company]'s equity interests in the Company;


(5) WHEREAS, Wanhui Group and Wen Xin agree to increase the registered capital
of the Company from the current RMB5,880,000.00 yuan to US$ 1,750,000, and
the amount of increased capital US$1,039,000 shall be fully subscribed by
BMP;


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(6) WHEREAS, both Parties acknowledge that the contemplated share transfer,
capital increase and the debt restructuring of the Company shall be
completed in compliance with the requirements of the relevant laws and
regulations of the PRC and the provisions of the Articles of Association
of the Company;


(7) WHEREAS, the Company has reported to the employees' representative meeting
in respect of the restructuring of the Company with the participation of
foreign investment. And Beijing Pharmaceutical Group Co., Ltd., its
state-owned assets administration entity, has agreed with the contemplated
debt restructuring and share transfer hereunder.


NOW, THEREFORE Wanhui Group and BMP hereby agree as follows:


ARTICLE 1 SHARE TRANSFER


1.1 Wanhui Group agrees to transfer to BMP and BMP agrees to acquire from
Wanhui Group the 80% equity interest (the "TRANSFERRED SHARES") held by
Wanhui Group in the Company on the terms and conditions of this Agreement.


Wanhui Group agrees that BMP shall fully subscribe the amount of the
increased capital of the Company (the "AMOUNT OF INCREASED CAPITAL"),
i.e.US$1,039,000. BMP shall contribute such Amount of Increased Capital to
the Company in accordance with the provisions of the revised and restated
Articles of Association of the Company.


1.2 Both Parties agree that from the date when all of the following conditions
precedent have been satisfied (the "DATE OF TRANSFER"), BMP shall be the
owner of the Transferred Shares and become the shareholder of the Company:


(1) For the purpose of the transactions hereunder, Wanhui Group has been
provided by Yue Hua Certified Accounting Firm with the Asset
Evaluation Report (summary attached hereto as Schedule 1) with the
base date being April 30, 2004 (the "BASE DATE"). And such report
has been filed with Beijing State-owned Assets Administration Bureau
or its authorized entity, Beijing Pharmaceutical Group Co., Ltd.;


(2) Beijing State-owned Assets Administration Bureau or its authorized
entity, Beijing Pharmaceutical Group Co., Ltd., has approved the
terms and conditions of the debt restructuring and share transfer
provided in this Agreement;


(3) Wanhui Group has listed the Transferred Shares at Beijing Equity
Exchange and BMP has become the transferee of the Transferred
Shares;


(4) The share transfer contemplated under this Agreement, the share
transfer


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contemplated under the Share Transfer Agreement between BMP and
[name of the other shareholder of the Company], and the revised
Articles of Association of the Company have been approved by the
Ministry of Commerce or its authorized authority (the "EXAMINATION
AND APPROVAL AUTHORITY") and the Company has been issued with an
Approval Certificate of Foreign Investment Enterprise;


(5) Beijing Drug Administration Bureau has renewed the Pharmaceutical
Distribution License of the Company for an additional five years and
has approved the change of legal representative and other issues (if
any) thereon;


(6) The amendment registration in respect of the share transfer
contemplated hereunder, the share transfer contemplated under the
Share Transfer Agreement between BMP and Wen Xin, and the revised
Articles of Association of the Company has been effected with
Beijing Administration for Industry and Commerce (the "REGISTRATION
AUTHORITY"); and


(7) There shall have been no material adverse change in the financial
condition, operations or business prospects of the Company during
the Transition Period, as such terms are defined in Article 3.1,
with the exception of any such material adverse change resulting
from an action or inaction taken by the Company with the approval of
the Supervision Committee as such terms are defined in Article 3.1.


Upon the completion of the share transfer hereunder and the share transfer
as contemplated under the share transfer agreement between BMP and [name
of the other shareholder of the Company], BMP shall become the sole
shareholder of the Company, and the Company shall be converted into a
wholly foreign owned enterprise pursuant to the PRC law.


1.3 Wanhui Group confirms that, prior to the execution of this Agreement, the
shareholders' meeting of the Company has adopted a valid resolution
approving the transfer of the Transferred Shares to BMP from Wanhui Group,
the subscription by BMP of the Amount of Increased Capital and the
corresponding amendments to the Articles of Association of the Company.


1.4 Wanhui Group confirms that Wen Xin has waived its right of first refusal
with respect to the Transferred Shares prior to the execution of this
Agreement, and its consent letter is attached hereto as Schedule 2.


1.5 No later than three (3) months after the date hereof, both parties shall
cause the Company to submit this Agreement, the revised Articles of
Association of the Company and an original copy of the duly signed
resolution referred to in Article 1.3 above together with other necessary
application documents to the Examination and Approval Authority.


1.6 Both Parties shall take their best endeavour to obtain the approval from
the Examination and Approval Authority, to assist the Company in going
through the amendment registration


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formalities with the Registration Authority and to obtain other government
approval, verification or registration which are required for the purpose
to implement the share transfer and debt restructuring hereunder.


ARTICLE 2 DEBT RESTRUCTUING AND CONSIDERATRION FOR THE SHARE TRANSFER


2.1 Debts to be restructured


Wanhui Group hereby represents and confirms that the following credit
rights and debt between the Company and itself shall be restructured in
accordance with the terms and conditions of this Agreement:


(1) RMB50,160,000.00 yuan owing to Wanhui Group by the Company as of the
Base Date, including the principal and interests accrued thereon,
the breakdown of which has been confirmed by Wanhui Group and the
Company in writing and attached hereto as Schedule 3 (A); Wanhui
Group confirms that such amount has contained all amounts owing to
it by the Company as of the Base Date, excluding those incurred as a
result of the normal business transactions with the Company;


(2) RMB12,820,000.00 yuan owing to the Company by Wanhui Group as of the
Base Date (no interest was charged thereon), which does not include
any debt incurred in its normal course of business with Wanhui
Group, and the breakdown of which has been confirmed by Wanhui Group
and the Company in writing and attached hereto as Schedule 3 (B);


(3) RMB7,000,000.00 yuan owing to Wanhui Group by the Company incurred
after the Base Date, excluding any accrued interest thereon, the
breakdown of which has been confirmed by Wanhui Group and the
Company in writing and attached hereto as Schedule 3 (C); Wanhui
Group confirms that such amount has contained all amounts owing to
it by the Company from the Base Date till the date hereof, excluding
those incurred as a result of the normal business transactions with
the Company.


2.2 Debt Restructuring and the Payment of Considerations for Share Transfer


As conditions to the share transfer hereunder, both Parties agree to have
the credit rights and debts between Wanhui Group and the Company provided
in Article 2.1 restructured as follows:


2.2.1 Set-off of the credit rights and indebtedness


As the pre-condition for BMP to acquire the Transferred Shares from Wanhui
Group and perform its obligations provided in Articles 2.2.2 and 2.2.3
herebelow, Wanhui Group


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agrees that:


(1) No interests shall be accrued on the amount owing to Wanhui Group by
the Company as set forth in Article 2.1(1) from the Base Date;


(2) The amount owing to Wanhui Group by the Company under Article 2.1(1)
shall be set off against the amount owing to the Company by Wanhui
Group under Article 2.1(2) on the date hereof. The confirmation
letter issued by Wanhui Group and the Company with respect to their
mutual acknowledgement to such set-off is attached hereto as
Schedule 3(D).


After the set-off mentioned above, the net amount owing to Wanhui Group by
the Company which shall be restructured in accordance with the provisions
herebelow shall be RMB 44,340,000.00 yuan or other amount as adjusted as
per Article 2.4 hereof.


2.2.2 Debt to be paid by BMP on behalf of the Company


As one of the considerations for transferring the Transferred Shares by
Wanhui Group to BMP, BMP agrees to pay Wanhui Group as per this Article
2.2.2.


(1) With respect to the net debt owing to Wanhui Group by the Company as
provided in Article 2.2.1(2), BMP agrees to pay RMB 8 million yuan
or other amount as adjusted as per Article 2.4 herein (the "DEBT TO
BE PAID BY BMP") in accordance with the terms and conditions
hereunder;


(2) Within ten (10) working days from the date hereof, BMP shall
pay,through the Company,Wanhui Group 30% of the Debt to be Paid by
BMP as down payment ("DOWN PAYMENT").


Should this Agreement be terminated due to Wanhui Group, Wanhui
Group shall return BMP the Down Payment plus the interest thereon
calculated at prevailing deposit interest rate with the same tenure
within five (5) working days upon the receipt of payment notice from
BMP.


Should this Agreement be terminated due to BMP, Wanhui Group will
not return the Down Payment.


Should this Agreement be terminated due to reasons neither
attributable to Wanhui Group nor BMP, Wanhui Group shall return BMP
the Down Payment plus the interest thereon calculated at prevailing
deposit interest rate with the same tenure within five (5) working
days upon the receipt of payment notice from BMP.


(3) Subject to the satisfaction of the following conditions, BMP shall,
through the Company, pay Wanhui Group the rest of the Debt to be
Paid by BMP within thirty


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(30) working days after the Date of Transfer:


(a) All the Schedules hereof have been executed pursuant to the
provided form and have become effective; and


(b) Wanhui Group has not violated any of its representations,
warranties and undertaking made hereunder.


Except otherwise mutually agreed in writing, BMP shall be entitled
to terminate this Agreement if the above conditions fail to be
satisfied within three (3) months after the Date of Transfer.


(4) BMP shall make payment in accordance with this Article 2.2.2 in
equivalent US dollars amount calculated at the average rate between
US dollars and RMB promulgated by the People's Bank of China on the
date of payment. Wanhui Group shall notify BMP in writing of its
bank account to receive such payments and the payment itinerary in
advance.


2.2.3 Debt to be paid via loan arranged by BMP


In addition to Article 2.2.2, as the other consideration for transferring
the Transferred Shares by Wanhui Group to BMP, BMP agrees to arrange
entrusted loan to the Company as per this Article 2.2.3 in order to enable
the Company to repay Wanhui Group in accordance with the following
provisions.


(1) With respect to the net debt owing to Wanhui Group by the Company as
provided in Article 2.2.1(2), BMP agrees to arrange a lender to
provide entrusted loan to the Company in order to enable the Company
to repay RMB7 million yuan (the "DEBT PAID VIA ARRANGEMENT BY BMP")
to Wanhui Group;


(2) The Company, the lender arranged by BMP and CITIC Industrial Bank
shall enter into an entrusted loan contract substantially complying
with Schedule 4 hereof on the date hereof. The facility amount shall
be applied to repay Wanhui Group the amount owing to Wanhui Group
set forth in Clause 2.2.3(1) within five (5) working days as of the
date hereof;


(3) Should this Agreement be terminated due to Wanhui Group, and the
Company fail to repay the lender arranged by BMP the principal and
interest due plus all reasonable expenses incurred by the lender
arranged by BMP with regard to such entrusted loan, including but
not limited to the commission fees thereon (if any), Wanhui Group
agrees that, as the guarantor of the Company, it shall pay the
lender arranged by BMP any amount payable by the Company on behalf
of the Company within five (5) working days after the receipt of the
notice of repayment from CITIC Industrial Bank.


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Should this Agreement be terminated due to BMP, the Company shall
not be obligated to repay the lender arranged by BMP the interest
due and payable. The Company shall repay the lender arranged by BMP
the principal within two (2) working days after CITIC Industrial
Bank issues notice of repayment. If the Company fails to repay the
principal, Wanhui Group agrees that, as the guarantor of the
Company, it shall pay such principal to the lender arranged by BMP
on behalf of the Company within five (5) working days after the
receipt of the notice of repayment from CITIC Industrial Bank.


Should this Agreement be terminated due to reasons neither
attributable to Wanhui Group nor BMP, and the Company fail to repay
the lender arranged by BMP the principal and interest due plus all
reasonable expenses incurred by the lender arranged by BMP with
regard to such entrusted loan, including but not limited to the
commission fees thereon (if any), Wanhui Group agrees that, as the
guarantor of the Company, it shall pay the lender arranged by BMP
any amount payable by the Company on behalf of the Company within
five (5) working days after the receipt of the notice of repayment
from CITIC Industrial Bank.


2.2.4 Debt to be forgiven


As a pre-condition to BMP's acquisition of the Transferred Shares from
Wanhui Group and BMP's performance of its obligations provided in the
above-mentioned Articles 2.2.2 and 2.2.3, Wanhui Group agrees that, as of
the date hereof, except for the Debt to be Paid by BMP and Debt Paid via
Arrangement by BMP, the Company shall be exempted from paying the rest of
the net debt provided in Article 2.2.1(2), including the principal and
accrued interests, totalling RMB29,340,000.00 yuan or other amount as
adjusted as per Article 2.4 herein (the "FORGIVEN DEBT").


2.3 In consideration that BMP performs its obligations under Articles 2.2.2
and 2.2.3 herein, Wanhui Group agrees and confirms that BMP shall not be
obligated to pay any additional amount with respect to the Transferred
Shares.


2.4 Both Parties confirm that the credit and debt amount provided in Articles
2.1(1) and 2.1(2) are based on the Asset Evaluation Report issued by Yue
Hua Certified Accounting Firm.


Both Parties agree that the amounts of the Debt to be Paid by BMP and/or
the Forgiven Debt shall be adjusted accordingly should substantial
mistakes be found in the said evaluation report or the net assets of the
Company changes substantially during the period from the Base Date to the
date hereof. Where the net assets of the Company changes beyond RMB
200,000.00 yuan as confirmed by a PRC certified public accountants
mutually recognized by both parties in accordance with PRC accounting
system, the amounts of the Debt to be Paid by BMP shall be increased or
decreased by such amount. However, any change to the net assets arising
from the debt restructuring shall not be calculated for such


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purpose.


Both parties agree that if the Company need pay any tax due to the debt
restructuring, the Debt to be Paid by BMP shall be reduced accordingly by
such amount.


ARTICLE 3 ARRANGEMENTS DURING TRANSITION PERIOD


3.1 Both Parties shall take all necessary measures to ensure the proper
operation and smooth transition of the Company between the date hereof and
the Date of Transfer ("TRANSITION PERIOD"). Both parties agree that BMP,
Wanhui Group and [the other shareholder] shall appoints respective
delegates to establish a supervision committee. Such committee shall be
composed of seven members, with BMP appointing three, Wanhui Group
appointing three, the other shareholder appointing one. The chairman of
the supervision committee shall be from the delegates appointed by BMP.
Any major decisions shall not be concluded unless approved by half
(inclusive) of all the members of the supervision committee. No major
business decision of the Company shall be made without prior consent of
such supervision committee.


3.2 During the Transition Period, Wanhui Group shall not enter into agreement
or document related to the Transferred Shares with any third party,
including but not limited to the transfer of the Transferred Shares in
whatever means, pledge or any kinds of disposal of the Transferred Shares.


3.3 Wanhui Group agrees that the Company will not make dividend distribution,
in whatever manner, during the Transition Period. BMP shall be entitled to
delegate its financial personnel to supervise the financial operation of
the Company.


ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDETAKINGS


4.1 Each Party represents and warrants to the other Party that, on the date
hereof, the Date of Transfer and each payment date:


(1) It has full power and authorization to execute and perform this
Agreement and its Schedules;


(2) This Agreement shall be legally binding on such Party as of the
Effective Date; the execution and performance of this Agreement and
its Schedules to which it is a party does not violate its Articles
of Association or the provisions of any contracts, agreements or
other legal documents to which it is a party; and


(3) No lawsuit, arbitration or other legal or governmental proceeding is
pending or threatened against it that would affect its ability to
perform its obligations under this


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Agreement.


4.2 Wanhui Group hereby represents and warrants to BMP that, on the date
hereof, the Date of Transfer and each payment date:


(1) The Company is legally incorporated and duly existing under PRC law,
having all powers and government authorization, permit, consent and
approval which are required for it to carry out its current
business, which will not be terminated or prejudiced or may be
terminated due to the transactions hereunder;


(2) Wanhui Group is the sole legal own ...