LoanAgreement Byand between TheShareholder of Qingdao Niao Bio-Technology Ltd. and NeoStem(China), Inc.

Exhibit 10.4

 

This Loan Agreement (this “Agreement”) is executed by and between the following Parties on June 1, 2009, in Qingdao City, the People’s Republic of China ( the “PRC”).

(1)	Sole Shareholder of Qingdao Niao Bio-Technology Ltd. (hereinafter as the “Borrower” or “Party A”):

 

Legal Representative: Robin Smith

 

(Party A and Party B are collectively called “the Parties” and individually called “each Party” or “a Party” in this Agreement.)

(1) The Borrower (Party A) hold 100% of the equity interests in Qingdao Niao Bio-Technology Ltd. (the “Company”);

(2) Party B is a wholly foreign-owned enterprise incorporated under the PRC laws;

(3) Party A desires to secure a loan from Party B, for the purpose of increasing the registered capital of the Company, by pledging its equity in the Company to Party B as a guaranty of the loan, and Party B agrees to provide the loan to Party A ;

NOW, THEREFORE, The Parties have agreed through friendly negotiation to the terms and conditions with respect to the loan hereunder as follows:

Except where provided otherwise, the terms used in this Agreement shall mean:

1.1 “PRC” refers to the People’s Republic of China, excluding the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Province;

 

Loan Agreement

Confidential

 

1.2 “PRC Laws” refers to all PRC laws, administrative regulations and government rules in effect;

1.3 “RMB” refers to the legal currency within the PRC;

1.4 “Loan” refers to the Total Principal to be loaned to the Borrower by the Lender in accordance with Article 2 hereunder;

1.5 “The Company” refers to Qingdao Niao Bio-Technology Ltd., a domestic company which is incorporated and validly existing under PRC Laws; its business license No. is370212230011070, and its registered address is Room 501, Unit 2 Building 1, No.17 YinChuanDong Road, Laoshan District, Qingdao City.;

1.6 “Shareholder” refers to the sole Shareholders of the Company;

1.7 “Equity” or “Equity Interests” refers to the equity interests in the Company;

1.8 “Equity Transfer” refers to the assignment of Equity Interests in the Company held by Party A to Party B or its designated third party in accordance with the provisions of the exclusive purchase option agreement (the “Exclusive Purchase Option Agreement”) executed on June 1, 2009.

1.9 “Asset Transfer” refers to the assignment of the assets of the Company by the Company to Party B or its designated third party in accordance with the provisions of the Exclusive Purchase Option Agreement.

1.10 “Consideration for Equity Transfer” has the meaning set forth in Section 6 of this Agreement.

1.11 “Consideration for Assets Transfer” has the meaning set forth in Section 6 of this Agreement.

2.1 The total principal amount of the loan hereunder is RMB 2,100,000.00 Yuan (the “Total Principal”), and the amount and ratio of the loan to be made to the Shareholder is as set forth in the following table:

 

 

Loan Agreement

Confidential

 

3.1 Unless otherwise provided, the term of this Agreement shall begin from the Effective Date and expire when the loan is completely repaid by the Borrower in accordance with the provisions of Article 6 hereunder.

4.1 The full amount of the loan provided hereunder shall be used to increase the registered capital of the Company, and the Borrower shall in no event change the usage without the prior written consent of the Lender.

4.2 The Borrower shall cause the Company to complete the registration of the Company with the competent Administration Bureau of Industry and Commerce in respect of the increase in the registered capital of the Company within thirty (30) business days upon receipt of the Loan hereunder, and such period may be prolonged upon the consent of the Lender.

5.1 Except as provided in Section 5.2 hereunder, the Loan hereunder shall be interest-free.

5.2 If the Consideration for Equity Transfer or the Consideration for Asset Transfer, in accordance with Section 6 hereof, is higher than the Total Principal as a result of the requirements of then applicable law or for any other reason, the excess shall be deemed to be loan interest/utilizing fees of the Loan to the largest extent permitted by PRC Laws, and will be paid to Party B by Party A together with loan principal.

6.1 The Loan shall be repaid upon receipt of written notice sent by Party B to Party A (the “Repayment Notice”), which shall instruct Party A to repay the Loan in accordance with Section 6.3 hereof.

6.2 The Repayment Notice shall indicate the term of repayment, which shall be adjusted from time to time by Party B in accordance with the provisions of PRC Laws regarding equity transfers (the “Repayment Term”).

6.3 Except as provided otherwise by the Repayment Notice, Party A shall make payment to Party B during the Repayment Term as follows:

6.3.1

In the event of any Equity Transfer by Party A, the after-tax consideration paid to Party A in exchange for such Equity Transfer (including the principal and interest of the loan, if applicable) (hereinafter as the “Consideration for Equity Transfer”) shall be used by Party A to repay the Loan to Party B;

Loan Agreement

Confidential

6.3.2

In the event that the Company receives consideration for any Asset Transfer, Party A shall cause the Company to adopt a plan of profit distribution to transfer all after-tax income of the Company to Party B to the greatest extent permitted by PRC Laws, in order to repay the loan made by Party B under this agreement.

6.4 If the Consideration for Equity Transfer or Consideration for Asset Transfer is lower than the total principal under this Agreement, Party A shall be exempted from the shortfall repayment obligation.

 

7.1 The loan shall be granted only upon satisfaction of all the following conditions:

7.2 Party B shall grant the Loan immediately and deposit it in the escrow account as agreed by Party B for increasing the registered capital of the Company after it receives written evidence which proves that Party A has fulfilled all the conditions under Section 7.1 hereof.

 

8.1 Party A hereby represents and warrants to Party B that, as of the execution date of this Agreement:

8.1.1

Party A legally holds 100% of the Equity in the Company;

Loan Agreement

Confidential

 

8.2 Party A warrants to Party B that, as of the execution date of this Agreement:

 

 

Loan Agreement

Confidential

 

8.3 Party A warrants to Party B that it shall use its best efforts to ensure that the Company:

 

9.1 To secure the repayment of the debts under this Agreement, Party A agrees to pledge all his equity in the Company to Party B, and both Parties agree to execute the Equity Pledge Agreement with respect thereto.

 

Loan Agreement

Confidential

 

10.1 The Parties shall pay their respective taxes and expenses in relation to the execution and performance hereof in accordance with PRC Laws.

10.2 Party B shall pay taxes and expenses in accordance with Section 6.4 hereof (if applicable).

11.1 Party A shall not transfer any or all of its rights and obligations under this Agreement to any third party without the prior written consent of Party B.

11.2 The Parties agree that Party B shall have the right to transfer any or all of its rights and obligations under this Agreement to any third party upon a six (6) days’ written notice to Party A without approval by Party A.

12.1 If Party A uses the Loan other than in compliance with the terms of this Agreement without Party B’s written consent, Party B shall require Party A repay the improperly used part promptly.

12.2 If Party A breaches the warranties and undertakings as provided in Article 8 hereof or other provisions under this Agreement and fails to redress such breach within sixty (60) days upon receipt of written notice from Party B, Party B shall be entitled to require Party A to repay the granted Loan promptly.

12.3 If Party A fails to duly repay the Loan in accordance with the provisions hereunder, then Party A shall pay the liquidated damage per day equal to 0.03% of the unpaid Consideration which falls due; if any delay of payment amounts to sixty (60) days, then Party B shall be entitled to exercise the right of pledge under the Equity Pledge Agreement.

13.1 This Agreement shall take effect on the date of execution hereof by Party A and the duly authorized representative of Party B.

13.2 The modification of this Agreement shall not be effective without written agreement through negotiation. If the Parties do not reach an agreement as to modification, this Agreement remains effective.

13.3 This Agreement shall not be discharged or canceled without written agreement through negotiation, provided that Party B may, by giving thirty (30) days’ prior notice to Party A, terminate this Agreement.

Loan Agreement

Confidential

 

13.4 Unless Party B fails to grant the Loan as required hereunder after the satisfaction of all conditions as set forth in Section 7.1 hereof by Party A, Party A shall in no event unilaterally terminate this Agreement.

13.5 If Party B fails to provide the Loan in accordance with the terms hereof, this Agreement shall be automatically terminated.

14.1 Any information, documents, data and all other materials (herein “confidential information”) arising out of the negotiation, signing, and implementing of this Agreement shall be kept in strict confidence by the Parties. Without the written approval of the other Parties, no Party shall disclose to any third party any relevant materials, but the following circumstances shall be excluded:

14.2 This Clause shall survive whether this Agreement is invalid, amended, revoked, terminated or incapable of implementation for any reason.

15.1 “Force Majeure” refers that any event that could not be foreseen, and could not be avoided and overcome, which includes among other things, but without limitation, acts of nature (such as earthquakes, flood or fire), government acts, strikes or riots.

15.2 If an event of force majeure occurs, any of the Parties that is prevented from performing its obligations under this Agreement by an event of force majeure shall notify the other Party without delay and within fifteen (15) days of the event provide detailed information about and notarized documents evidencing the event, shall take appropriate means to minimize or remove the negative effects of force majeure on the other Party and shall not assume the liabilities for breaching this Agreement. The Parties shall continue performing this Agreement after the event of force majeure disappears.

Loan Agreement

Confidential

16.1 The effectiveness, interpretation, implementation and dispute-resolution related to this Agreement shall be governed under PRC Laws.

16.2 Any dispute arising out of this Agreement shall be resolved by both Parties through mutual negotiation. If both parties cannot reach an agreement within thirty (30) days from the date on which the dispute is brought forward, either Party may submit the dispute to the Qingdao Arbitration Commission for arbitration under its applicable rules. The arbitration award shall be final and binding upon both Parties.

16.3 During the process of dispute-resolution, both parties shall continue to perform other terms under this Agreement, except for the provisions subject to the dispute resolution.

17.1 The Parties acknowledge that this Agreement constitutes the entire agreement of the Parties with respect to the subject matters herein and supersedes and replaces all prior or contemporaneous oral or written agreements and understandings.

17.2 This Agreement shall bind and benefit the successor of each Party and any transferee permitted hereunder with the same rights and obligations as if such successor or transferee were an original party hereto.

17.3 Any notice required to be given or delivered to the Parties hereunder shall be in writing and delivered to the address as indicated below or such other address or as such party may designate, in writing, from time to time. All notices shall be delivered by personal delivery, fax or registered mail. It shall be deemed to be delivered upon: (1) registered air mail: 5 business days after deposit in the mail; (2) personal delivery: the next business day after transmission. If the notice is delivered by fax, it should be confirmed by original through registered air mail or personal delivery:

Contact person: Liu Hongbing

Address: Room 102, Unit 4 Building 6, No.138 Huaneng Road, Licheng District, Ji’nan City

Tel:                                     Fax:

Contact person: Robin Smith

Address:

Tel:                                     Fax:

Loan Agreement

Confidential

17.4 This Agreement is executed in two (2) originals with each of the person for signing this Agreement holding one original, and each of originals shall be equally valid and authentic.

17.5 Whenever the consent of Party B is required under this Agreement, such consent shall not be effective unless such consent is also provided by either the sole shareholder, or the Executive Director, of Party B.

 

Loan Agreement

Confidential

 

IN WITNESS THEREFORE, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.

Party A  The Shareholder of Qingdao Niao Bio-Technology Ltd.

Legal Representative (or Authorized Representative): Robin Smith