Letter of Intent - Cheung Laboratories Inc. and Gao Yu Wen
LETTER OF INTENT
This Letter of Intent is made this 27th day of May, 1996 in Columbia,
Maryland between Mr. Sun Shou Yi ("Mr. Sun"), representative of Mr. Gao Yu Wen
("Mr. Gao") and Cheung Laboratories, Inc., a public company incorporated in
Maryland ("CLI").
RECITALS
WHEREAS, in February 1995, Mr. Gao subscribed to purchase 20,000,000 shares
of the common stock of CLI, 4,000,000 shares for $2,000,000 US cash (the "Cash
Shares") and 16,000,000 shares for a 9.6% interest in Aester Fine Chemical
Company (the "Aster Shares") and has purchased both the Cash Shares and the
Aester Shares;
WHEREAS, the purpose of the transaction with Mr. Gao was to utilize the
facilities to Aester to create a cosmetic business in China with joint venture
partners that would be beneficial to CLI and Mr. Gao;
WHEREAS on May 10, 1995, CLI deposited $700,000 US cash with Mr. Gao in an
investment account for Mr. Gao to manage and return an annual interest rate of
17% and $190,000 US of the account has been returned to CLI, leaving a balance
owing of $510,000 plus interest;
WHEREAS, despite significant efforts by Mr. Gao and CLI, the cosmetic
business objectives are unlikely to be achieved due to the impaired health of
Mr. Gao;
WHEREAS, Mr. Gao has incurred expenses in operating an Hong Kong office to
pursue the cosmetic business objectives and other business for CLI and has not
been reimbursed for such expenses;
WHEREAS, Mr. Sun has taken over, as a principal, the Aester Shares from
Mr.Gao, and represents Mr. Gao with regard to the Cash Shares and the investment
account; and
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WHEREAS, Mr. Gao is not in a position to pursue the cosmetic business plan
due to his impaired health and CLI is not in a position to pursue the cosmetic
business plan, as it will utilize its resources to pursue its hyperthermia
business:
NOW, THEREFORE, in consideration of furthering their respective business
interests, Mr. Sun, as the representative of Mr. Gao, and CLI do hereby agree as
follows, with the intention that this Letter of Intent will be binding and be
implemented under the terms of a definitive contract to be prepared in Hong Kong
and executed by the parties on or before June 8, 1996, which shall serve to
provide the details for closing the transaction, but shall not vary the terms of
this Letter of Intent.
1. The above recitals are hereby incorporated in and made a part of
this Agreement.
2. CLI agrees to purchase all of the Cash Shares and pay Mr. Gao or his
designated recipient on or before November 30, 1996, a sum total of US
$2,200,000 (four million shares at $0.55/share).
3. Upon signing of the definitive contract on or before June 8, 1996,
the transactions pertinent to the Aester Shares and Cash Shares are considered
rescinded. Mr. Gao (or his representative) will deposit both the CLI Cash Shares
and the Aester Shares in an escrow account held by a mutually agreeable third
party. The Aester Shares and Cash Shares are held in escrow as collateral for
full payment of the $2,200,000 mentioned in paragraph above. The Cash Shares and
the Aester Shares shall be returned immediately to CLI once the full payment of
$2,200,000 has been made.
4. The closing of the transaction contemplated by paragraphs and shall
occur on or before November 30 in Hong Kong under the procedures agreed to in
the definitive contract. At closing, Mr. Gao (or his representative) shall
deliver the Cash Shares and the Aester Shares free and clear of any liens or
encumbrances and CLI will deliver a cash sum total of US $2,200,000.
5. Mr. Gao will provide an expense accounting promptly to CLI for the
expenses incurred in work on the cosmetic business and other businesses of CLI
and, following review of the accounting by CLI, will be reimbursed from the
investment account for the expenses approved by CLI. CLI is to exercise its
reasonable business judgment. This expenses accounting shall be completed by
both parties by June 15, 1996 and the investment account balance fully resolved
by such date.
6. This the full agreement of the parties concerning the subject matter
and is to be implemented by the definitive contract described above. This Letter
of Intent shall be interpreted and enforced under the internal law of Maryland
319383.001(B&F) 2
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the English version of this Letter of Intent shall control its terms. The terms
and conditions defined in the definitive contract to be signed on or before June
8, 1996 shall govern.
IN WITNESS WHEREOF, intending to be bound, the parties do hereby
execute this Letter of Intent.
CHEUNG LABORATORIES, INC.
By:/s/__________________________
MR. GAO'S REPRESENTATIVE
By:/s/__________________________
319383.001(B&F) 3
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REDEMPTION AGREEMENT
THIS REDEMPTION AGREEMENT (the "Agreement") is made this 6th day of
June, 1996 in Hong Kong between Mr. Sun Shou Yi ("Mr. Sun"), representative of
Mr. Gao Yu Wen ("Mr. Gao") and Cheung Laboratories, Inc., a public company
incorporated in Maryland, USA ("CLI" and/or the "Company").
RECITALS
WHEREAS, on the 27th day of May, 1996, the parties entered into a
binding Letter of Intent for CLI to redeem 20,000,000 shares of the common stock
of CLI from Mr. Gao under the terms and conditions set forth in the Letter of
Intent, such terms and conditions to be fully implemented by this Redemption
Agreement.
NOW, THEREFORE, in consideration of furthering their respective
business interests, Mr. Sun, as the representative of Mr. Gao, and CLI do hereby
agree as follows:
1. The Letter of Intent dated May 27, 1996, is hereby
incorporated in and made a part of this Agreement.
2. Mr. Sun and CLI do hereby jointly appoint Leung To Kwan
Pauline, solicitor, as the escrow agent ("Escrow Agent") to carry forth those
responsibilities set forth in this Agreement to be executed by the Escrow Agent.
The attached Escrow Agreement shall be executed by Mr. Sun, CLI and the Escrow
Agent.
3. CLI does hereby rescind and renounce the 9.6% interest it has
held in Aester Fine Chemical Incorporated Limited, a corporation incorporated
under the laws of China ("Aester") and Mr. Sun does hereby rescind and renounce
the 20,000,000 share interest which Mr. Gao has held in CLI. The books and
records of CLI shall show that the 20,000,000 CLI shares previously held by Mr.
Gao have been rescinded and the books and records of Aester shall reflect that
the 9.6% interest previously held by CLI has been rescinded, all as of the date
that CLI delivers US $2,200,000 to Mr. Sun as described in this Agreement.
4. Mr. Sun shall deliver to the Escrow Agent, within ten (10) days
of execution of this Agreement, the 20,000,000 CLI shares previously held by Mr.
Gao and such shares shall serve as security for the obligations of CLI to be
performed under this Agreement (as described in paragraph below). If CLI shall
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fail to perform its obligations under this Agreement by November 30, 1996 (as
set forth in paragraph below), a penalty of 3/4% per month shall be added to the
amount payable by CLI, it being the intention of the parties that the payment be
made and the CLI stock be released to CLI. If CLI fails to perform its
obligations after three months past November 30, 1996, the Escrow Agent will
return the 20,000,000 shares to Mr. Sun for his disposition.
5. Within ten (10) days of the execution of this Agreement, CLI shall
deliver to the Escrow Agent all evidence of CLI's 9.6% interest in Aester
previously held by CLI. The Escrow Agent shall mark such documentation as
rescinded and cancelled under this Agreement and transmit such documentation to
Mr. Sun.
6. On or before the close of business on November 29, 1996 in Columbia,
Maryland, USA, CLI shall wire transfer $2.2 million (US) pursuant to
instructions provided by Mr. Sun. Upon confirmation by CLI's bank that such wire
transfer has been initiated by the bank, CLI shall have fully performed its
obligations under this Agreement. CLI's bank shall send by facsimile
transmission to the Escrow Agent evidence of having initiated such wire
transfer. Upon receipt by such notice, the Escrow Agent shall release the
20,000,000 shares of CLI stock to CLI.
7. Mr. Gao has given notice to the Company that he will not be able to
serve on the Board of Directors and CLI shall accept this notice as Mr. Gao's
resignation from the Board of Directors of CLI, effective the date of this
Agreement. Mr. Gao will provide an expense accounting promptly to CLI for the
expenses incurred in work on the cosmetic business and other businesses of CLI
and, following review of the accounting by CLI, will be reimbursed from the
investment account for the expenses approved by CLI. CLI is to exercise its
reasonable business judgment. This expenses accounting shall be completed by
both parties by June 15, 1996, and the investment account balance fully resolved
by such date. After signing this Agreement, Mr. Gao will transfer the voting
power of his shares to Dr. A. Cheung, the representative of CLI. It is further
acknowledged that upon signing this Agreement, Mr. Gao and his representative
will no longer be financially and legally responsible to the operation of CLI
business.
This Agreement reflects the full understanding of the parties and shall
be interpreted and enforced under the internal laws of the State of Maryland,
USA, and the English version of this Agreement shall control its terms.
319383.001(B&F) 2
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IN WITNESS WHEREOF, the parties, intending to be bound, do hereby
execute this Agreement as of the date above written.
WITNESS CHEUNG LABORATORIES, INC.
/s/_________________________ By: /s/_______________________
MR. SUN SHOU YI, AS
REPRESENTATIVE OF MR. GAO
YU WEN
/s/_________________________ By: /s/_______________________
Mr. Sun Shou Yi
319383.001(B&F) 3