Exhibit 10.1

Agreement

Party A:    Department of Finance of Zheng Lan Qi (County) of Inner Mongolia

Party B:    Synutra International, Inc.

 
I.
Whereas:

In order to speed up local economic development, improve structural reforms of
local industries, and to push forward commercial development of local
agri-business and husbandry, Party A intends to introduce Party B to establish,
within Zheng Lan Qi area, a 100% foreign owned dairy production and processing
company. The following understanding has been reached and agreed upon. Party B
intends to take control of all the assets (including land use rights and all
milk collection facilities) of the company formerly known as Zheng Lan Qi Wan Da
Shan Dairy Company, Ltd of Inner Mongolia (hereafter referred to as “Lan Qi
Dairy”), at a price of RMB 31,000,000, in order to establish a wholly
foreign-owned company (hereafter referred to as “New Foreign Company”) and to
complete building of the facilities so to ensure its commissioning within the
year.

 
II.
Rights and Obligations of the Parties

 
a.
Party A’s Rights and Obligations

 
i.
Party A is committed to supporting development of the New Foreign Company
established by Party B, and intends to make an incentive cash award to Party B
in the amount of RMB 30,000,000.

 
ii.
Party A is to ensure obtainment of pre-approval by the governing agencies over
such intended transaction as well as necessary approval from relevant state
assets management agency.

 
iii.
Party A represents that it owns and has the right to dispose of all the assets
in the transaction, including the plant buildings, equipment, and related land
use rights. Party A also represents that the said assets are complete and
intact, and free of any liens, security and guarantee claims, or third party
interests.

 
iv.
Party A is to ensure the unhindered use of the said assets by Party B and to
assume the responsibility of resolving any dispute that may arise out of the
above mentioned property claims.

 
v.
Party A is to assist Party B to obtain access to Lan Qi Dairy and to work with
its personnel to take inventory of all assets and related financial and
accounting data, as well as to affect transfer of all files related to the
preceding engineering and construction work completed up to the date of such
transfer.

 
 
 

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vi.
Party A is to be responsible to complete paper work and registration of the said
transfer of asset ownership and use rights.

 
vii.
Party A is to be responsible to make arrangements for all displaced personnel
formerly employed by Lan Qi Dairy.

 
viii.
Party A is to be responsible to complete necessary paper work for the
dissolution of Lan Qi Dairy, and to assist Party B in obtaining necessary
approval as well as business registration for the establishment of the New
Foreign Company.

 
b.
Party B’s Rights and Obligations

 
i.
In order to ensure the interest of dairy farmers and the development of stable
milk supply, Party B shall, following the effectiveness of this agreement,
organize controlled production by the plant facilities of the former Lan Qi
Dairy on conditions that the products meet quality standards set by Party B,
until the formal commissioning of the New Foreign Company’s production
facilities and plants.

 
ii.
Party B is to be responsible to build a 40 ton/day hydrous milk fat production
line, within 7 months following the effective date of this agreement.

 
iii.
The New Foreign Company shall ensure collection of all locally produced milk in
Zheng Lan Qi area, and to ensure full and timely payment of costs of milk
collected, in addition to building second phase plant facilities to ensure milk
collection from expanded milk production bases added by Party A.

 
iv.
The New Foreign Company shall buy fresh milk at fair market prices varying with
the quality and supply of such.

 
v.
The New Foreign Company is to give priority to hiring local labor force.

 
vi.
In addition to normal preferential policies accorded to foreign investment
enterprises, the New Foreign Company is also to be accorded new preferential
policies under the “Western Development” program installed by the Inner Mongolia
Autonomous Region. When these two sets of policy programs differ on same or
similar items, more preferential program shall be adopted.

 
 
 

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III.
This agreement is to be made in duplicates of four, with two to each Party. The
Parties will resolve any remaining issues in an amicable fashion through further
discussions. This agreement is to be signed by both Party A and Party B
respectively, and will only become effective after Party B verifies the
obtainment of written commitment and related documentation that Clauses a. and
b. of Article II “Party A’s Rights and Obligations” are met, and the obtainment
of relevant certification to the effect that Party A has undertaken procedures
to dissolve Lan Qi Dairy according to Clause h. of Article II “Party A’s Rights
and Obligations” herein (including but not limited to establishment of a
settlement operation, posting public notices of dissolution of the entity, and
fully accounting for and registering equity and liabilities, etc.).

 
IV.
Parties shall resolve any dispute that may arise with regards to this agreement
through amicable negotiations and discussions. In case such dispute can not be
so resolved between the Parties, any one of the two Parties may refer the
dispute to a court of law in the Municipality of Beijing that has appropriate
jurisdiction over the dispute for decision or resolution.

Party A:
 
 
Party B:
 
 
Corporate Seal
 
 
Corporate Seal
 
 
Signed by:_______________________________
Authorized Representative
Signed by:_______________________________
Authorized Representative
   
Bank of Record:
Bank of Record:
   
Account Number:
Account Number:
   
Date: June 8, 2006
Date: June 8, 2006

 
 

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Amendment to Agreement

Agreement Effectiveness Certification:

Pursuant to Article III of Agreement made between Department of Finance of Zheng
Lan Qi (County) of Inner Mongolia (referred to as Party A in said Agreement) and
Synutra International, Inc. (referred to as Party B in same Agreement) on June
8th, 2006, the effectiveness of the said Agreement shall follow the obtainment
of written commitment and related documentation that Sub-Clauses i. and ii. of
Article II, Clause a. “Party A’s Rights and Obligations” are met, and the
obtainment of relevant certification to the effect that Party A has undertaken
procedures to dissolve Lan Qi Dairy according to Sub-Clause vii. of Article II,
Clause a. “Party A’s Rights and Obligations” therein (including but not limited
to establishment of a settlement operation, posting public notices of
dissolution of the entity, and fully accounting for and registering equity and
liabilities, etc.) by Synutra International, Inc. In addition, both Parties
recognize their understanding that the effective date of the Agreement is
dependent upon verification that at least 60% of the cash incentive payment as
put forth in Sub-Clause i. of Article II, Clause a. “Party A’s Rights and
Obligations” has been made on or before September 30, 2006.

Through joint inspection and verification, Synutra International, Inc. hereby
certifies, and the Department of Finance of Zheng Lan Qi (County) in turn
accepts, that all the conditions and requirements set forth in the
afore-mentioned clauses have been met and the required level of at least 60% of
cash incentive payment was attained and the said Agreement became effective on
or before September 30, 2006.

It is further agreed by both Synutra International, Inc. and the Department of
Finance of Zheng Lan Qi (County) that all related monetary transactions as well
as financial commitments preceding this effective date of the said Agreement
shall be recognized as of the date of receipt and recorded as non-refundable
government subsidies from Party A and investment in land use rights, plant
buildings, and related equipment (see attached schedule for a breakdown of the
investment expenditures) from Party B.

Closing:

Based on the above certification and verifications, the said Agreement shall be
recognized as effective on or before September 30, 2006 and both Parties
consider the transaction closed as of the date of signatures to this amendment
below.

Amendments:

Both Parties agree that these amendments made herein on this date of signatures
shall form an integral part of the said Agreement entered into between the
Parties on June 8, 2006.

 
 

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Signatures:

 
Certified by (Party B)
Synutra International, Inc.
 
 
 
Signed by:_______________________________
Date: November 6, 2006
 
 
Accepted by (Party A)
Department of Finance of Zheng Lan Qi
(County)
 
 
Signed by:_______________________________
Date: November 6, 2006
 

Attachment:

Schedule of Investment Expenditures
     
Paid in by Category up to September 30
         
Land use rights
 
$
252,886
 
Buildings
   
3,257,251
 
Equipment
   
164
           
Totals
 
$
3,510,301
 

 
 
 

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