Proposal to Franchisee

Proposal to Franchisee

PART I OUR BUSINESS CONCEPT AND OUR VISION

1.1 OBJECTIVE

Our objective is to deliver and promote Traditional Chinese Medicines in Canada and United States of America through SANJIU's products and services.

Our vision and mandate is to deliver quality and high performance Traditional Chinese and Natural Medicine healthcare services and products to the people of North America. Our mandate is to improve the professional status of Traditional Chinese Medicines and the practitioners

1.3 OUR COMMON GOAL

We unify our expertise and resources to disseminate this ancient but effective healing knowledge and service to every corner and every people of North America, not only restricted to Chinese.
Our goal is to establish Sanjiu TCM Medical Center is the most reputable and high performance TCM clinic offering best healthcare service in North America. Whenever they think of Chinese or Natural Medicine, they choose Sanjiu Medical Center first.

1.4 HOW WE CAN ACHIEVE THIS GOAL IN GENERAL

We modernize Traditional Chinese medicine services and products by high technology and modern management. One of the key concepts is to enable the demonstration of Traditional Chinese and Natural Medicine's effectiveness in curing people through education and consultation by professional practitioners.

SECTION II - WHO IS SANJIU E-TECH INC: A HISTORY

2.1 WHO IS SANJIU?

Sanjiu Enterprise Group of China Consists of 52 related enterprises. The Sanjiu Enterprise Group has its headquarters in Shenzhen, China, just north of Hong Kong. The company is currently the largest enterprises in China manufacturing Chinese medicine, which are well received by patients around the world. The technical and scientific innovations of Sanjiu Pharmaceutical Company Limited lead constantly to new achievements. Last year, two innovations," Sanjiu Refined Single Chinese Herbal extract tea" and Sanjiu Electronic TCM Dispensing Machine", revolutionized Traditional Chinese Medicine by the combination of modern science and technology. The former innovation develops single herbal teas that contain the efficacious components extracted from the frequently used Chinese herbs while the latter is an integrated computerized management and dispensing system that links the Chinese Medicine manufacturer, the doctors, the patients and the dispensing stores scattered in different places.

Today Sanjiu's products are sold throughout China and other countries. With combined total and intangible assets of 110 billion Yuan and 47.33 billion Yuan, ( US$13.75 billion and US$5.9 billion ) respectively, as well as given its consistent revenue growth, Sanjiu Enterprise Group is projected to become a major global pharmaceutical company within the next decade.

Prof. Xinxian Zhao, chairman of the enterprise, is the Vice-Chairman of the Chinese Pharmaceutical Association. He has twice been elected as a representative to the (8th and 9th) National People's Congress in Beijing. Despite a heavy work schedule as head of the Sanjiu Enterprise Group, Prof. Xinxian remains active in the academic community as a part-time professor at a number of universities, including Tsinghua University, Zhongshan University, Nankai University, Tongji University, and Sichuan University.

2.2 SANJIU COMPANY PROSPECTIVE

Sanjiu Ideology
- Hardworking pioneering sprit
- Reforming and exploring development path
- High technology, high quality and high efficiency

Sanjiu Mechanism
- Leadership mechanism - Legal representative responsibility
- Decision mechanism - Democratic and intensive scientific decision mechanism

Management mechanism
- "4-cans" dynamic adjustment mechanism,
- cadres can be promoted or demoted,
- workers can be employed or dismissed,
- salaries can be improved or reduced,
- organizations can be set up or canceled

Supervisory mechanism-
- Legal supervision, inner supervision, financial and auditing supervision, system supervision, mass supervision and self-supervision.

Sanjiu's Development Strategy
- Life and health industrial, medical health network industrial.

2.3 CHAIRMAN AND PRESIDENT OF SANJIU ENTERPRISE GROUP,

Prof. Zhao Xinxian:

Prof. Zhao Xinxian is the Chairman of the Board and President of the Sanjiu Enterprise Group. Consisting of 52 related enterprises, the Sanjiu Enterprise Group has its headquarters in Shenzhen, China, just north of Hong Kong.
Prof. Zhao is the Vice Chairman of the Chinese Pharmaceutical Association. He has twice been elected as a representative to the (8th and 9th) National People's Congress in Beijing.

Despite a heavy work schedule as head of the Sanjiu Enterprise Group, Prof. Xinxian remains active in the academic community as a part-time professor at a number of universities, including Tsinghua University, Zhongshan University, Nankai University, Tongji University, and Sichuan University. This gives him the opportunity to continuing teaching while maintaining contact with students endeavoring to pursue a career in the sciences.

Prof. Zhao earned his Bachelor's Degree in 1964 in Pharmacology from the Department of Pharmacology at Shenyang Pharmaceutical College. After graduation he began working for Nanfang Hospital's Medical Bureau in Guangzhou. At the hospital he earned successive promotions, working his way up from Pharmacist and Chief Pharmacist to becoming Vice-Director and eventually Director of the hospital's Medical Bureau. While working at the hospital, Prof. Zhao authored his first work, "Herbal Injections", still considered a reference work in the field.

Beginning in the 1970's, Prof. Zhao conducted extensive research on a Chinese fruit found useful in the treatment of various chronic gastric disorders. Based on his research, he received a loan of 5,000,000 yuan in 1985 to found the Nanfang Pharmaceutical Factory within the Shenzhen Special Economic Zone, north of Hong Kong, to bring this product as a standardized extract to commercial production levels. The Nanfang factory officially started manufacturing and selling its first product, "Wei-Tai", in 1987. The product proved to be an immediate success as an effective remedy for many gastric related disorders. In its first year of production, the Nanfang Pharmaceutical Factory earned sufficient revenues to be able to retire its loan. As more products were developed, the company's reputation grew.

In 1991, Prof. Zhao helped found the Sanjiu Enterprise Group with the Nanfang manufacturing group, Sanjiu Medical and Pharmaceutical Co., Ltd., becoming its core enterprise. As additional enterprises were included in the larger enterprise group, the company began to become a prominent business in China. By 1995, the government's State Economy and Trade Commission and, the State Statistical Bureau, rated the Sanjiu Enterprise Group among the top 12 companies of some 20,000 large- and medium-sized industrial companies in China. In addition, Sanjiu Medical and Pharmaceutical Co., Ltd., research facilities were ranked among the top 120 research facilities in the country.

Under Prof. Zhao's leadership, the enterprise group established a commitment to substantiating the safety and effectiveness of its products. Scientists and technicians are organized around pharmaceutical and natural products research groups, studying potential products for their pharmaco-kinetics, pharmacology, biochemistry, toxicology, and efficacy. Combined with a sales and marketing force of over 2,500 employees, Sanjiu Medical and Pharmaceutical Co., Ltd., surpassed Smith Kline in 1998, to become the largest pharmaceutical company in China, a position it continues to maintain.

Today Sanjiu's products are sold throughout China and other Asian countries. With combined total and intangible assets of 110 billion Yuan and 47.33 billion Yuan, respectively, and given its consistent revenue growth, Sanjiu Enterprise Group is projected to become a major global pharmaceutical company within the next decade.

2.4 SANJIU E-TECH INC. OF CANADA

Sanjiu E-Tech Inc. of Canada is a joint venture company established by E-Tech Canada Limited and Sanjiu Pharmaceutical Co. Ltd. Its goal is to promote the Traditional Chinese Medicine by:

- Establishing the first organized and well-planned TCM Medical and Research Center in the world to strengthen the recognition of TCM in North America. Through our training center's courses and seminars, we impart accurate knowledge and information to anyone who is interested in TCM. We are fully committed ourselves to make the Medical and Research Center a place of attraction and to boost the popularity of TCM in North America. Our objective is to promote the merge of Traditional Chinese Medicine with the mainstream health care system and be well accepted by everybody.

- Setting up a TCM Specialists Clinic, with modern management and high-quality practitioners in a clean, sanitary and professional environment. Through concrete demonstrations, we provide high-quality healthcare services in the most direct way, making T.C.M. more appealing to North Americans.

- Setting up a research center for the modernization of Traditional Chinese Medicine while carrying out clinical research and study of the effectiveness of herbs and herbal extract.

- Setting up a global "Network Clinic" for patient gain access to T.C.M. doctors and services in real time.

2.5 SANJIU T.C.M. MEDICAL AND TRAINING CENTER, THE FLAGSHIP OF SANJIU E-TECH INC.

Products and Services

Sanjiu TCM Medical and Training Center is a comprehensive and multipurpose center that provides Chinese and alternative medical services to people of Canada and United State of America. This center is modern, comfortable and spacious. It has more than 7,000 square feet operating space and accommodates more than 20 practitioners. This center plays a very important part in the modernization of Traditional Chinese Medicine. This is the first TCM comprehensive clinical, research and resources center in the world. One of its key concepts for its establishment is to enable the demonstration of TCM's effectiveness in curing people through actual consultation with professional practitioners.

All the practitioners in the center are well-qualified doctors in TCM with many years of postgraduate experiences. They devote wholeheartedly to educate and share their expertise in Traditional Chinese Medicinal healing methods with all people in North America.

Other than a medical clinic, the center also organizes training classes and learning groups for various types of Chinese healthcare techniques such as Qi Gong, Tai Chi, Kung Fu, meditation and other fascinating exercises.

Nothing is more valuable than good health. The TCM Medical and Training Center combines today's modern technology and the ancient natural healing methods to serve humanity in North America. Our overall vision is to enhance the health of the human race.

2.6 ABOUT THE FOUNDER OF SANJIU E-TECH INC.

E-Tech Canada was founded by Mr. Paul Li, a telecommunications expert from Hong Kong, who immigrated to Canada in 1993. In 1994, Mr. Li founded E-Tech Canada with the goal of contributing his expertise and experiences to his new community through the enhancement of technology.

He further envisions the deficiency of alternative healthcare opportunities available to Canadians and implements Internet technology to enhance such opportunities. In November 2000, with a joint venture with Sanjiu Pharmaceutical Co. Ltd of China, E-Tech established a prominent reputation in providing efficient and effective alternative healthcare opportunities. The global community now has access to many valuable health information and resources including tele-medicine without the constraints of time, culture or distance.

2.7 LITIGATION ACTIONS OR BANKRUPTCY HISTORY

Sanjiu Pharmaceutical Company, E-Tech Canada Limited, and 999 E-Tech Inc. have no previous litigation actions or any bankruptcy history.

PART III SUPPORT AND SERVICES

3.1 HOW YOU CAN BENEFIT BEING OUR PARTNER/FRANCHISEE

You will be able to sell services and goods that have instant name recognition and can obtain training and ongoing support to help you succeed.
You will be given a format or system developed by SANJIU, the right to use the SANJIU's name for a limited time, and assistance from our staff and administration. For example, we can help you find a location for your outlet; provide you with initial training and an operating manual, and advise you on management, marketing, or human resources strategies. We will also offer ongoing support such as regional monthly newspaper or newsletters, a toll free 1-800 telephone number for referral of customers, and periodic workshops or seminars.

3.2 SPECIFIC PRODUCTS AND SERVICES

1. The right to carry SANJIU's name and get the instant name recognition of your medical center.
2. Continuous supply of full range Sanjiu branded Single herbal extract tea (more than 380 types) in factory prices offered exclusively to our franchisee.
3. Continuous supply of SANJIU branded name Chinese Medicines and formula medicines (more than 100 types) in factory prices which only offer exclusively to our franchisee.
4. Excellent support regarding our herbal extract tea and Chinese medicines including technical information, dispensing machine, storage, presentation and others.
5. To use and excel a proven clinic management system developed by SANJIU that includes computerized patient management, prescription management and account management.
6. To utilize the administrative procedures and materials developed by SANJIU such as posters, forms, licenses, certificates and etc.
7. The right to distribute the SANJIU's monthly newspaper, "Family Health" in your franchisee area and region. (in which you will be the exclusive distributor of the region)
8. Initial and recurrent training, periodic workshops or seminars to enable you to successfully handle the business.
9. Referral of customers.
10. Supply of professional practitioners or specialist to support the operation of the clinic if it is necessary.
11. Promotional and marketing support.

3.3 THE DEMANDS OF THE SERVICES AND PRODUCTS OF TRADITIONAL CHINESE MEDICINES

The demand for Traditional Chinese medicine in North America is rapidly increasing. It is because:
- More and more people care more about their health. They've started to acquire more alternatives, other than relying only on Western medicine and their family doctors
- It was found that there are many diseases and discomforts, which have no good healing effect in Western medicines, but have excellent effect by acupuncture, massage and herbal medicines.
- The aged people are increasing quickly worldwide. There are great demands in healthcare service between 60-80s. of age.
- People realize that many western drugs have side effect on human body.
- The Western medical expense is more and more expensive
- The Government and Insurance companies pay less and are responsible less for the medical expenses.

Now, more and more people in North America begin to know more about and trust Chinese and natural medicines. They start to recognize the treatment philosophy and learn its benefits with fewer side effects. More people are eager to know more as well as to use those medicines, foods, procedures, exercise and treatment to make their body healthier or to cure their sickness. Unfortunately, the resource available to them are extremely limited.

In China, traditional Chinese and natural medicine and treatment has more than 3000 years of history. Now, many scientists and doctors around the world proved that it has significance good result in curing certain types of sickness. It is a safe, effective method of correcting and prevention of sickness and disease symptoms without conventional pharmaceuticals and harsh chemicals with side effects. However, in the past 100 years, the development of Chinese and natural medicine was limited and has not been fully explored and studied due to the political situation of China. But now, China, Taiwan, Hong Kong, Japan, and even many western countries start to carry out schematic studies and researches on traditional Chinese and natural medicines and technique. Many drug and health-food manufacturers in US and Europe are working on a lot of researches making use of the herbs to made medicine and health food in many areas especially in prevention of sickness and disease.

Many Canadians and Americans especially not Chinese want to acquire the service and products, they do not know how and where to get an appropriate clinic or medical centre.
Now and the coming 10 years, Chinese and Natural Medicine is the new trend of heath-care and treatment. We believe that a "fever" will happened very soon and it can be predicted that Chinese and natural medicine, treatment and technique will play a very important role in Western medicine world. Billion of people around the world require this service and products- Traditional Chinese Medicine in Canada and USA
Most important is that the demand is not seasonal and it is an essential requirement. There is a continuing demand for the products or services in the future. The demand is permanent and the service and product generate repeat business.

3.4 THE CUSTOMER BASE

At the moment, most TCM practitioners in North America are focusing on Chinese residents. However, the major strength of the customer base is local Canadian or local American. Those people now begin to understand and use Chinese medicines for many diseases and discomforts. The customer base we are looking at should not be restricted to Chinese but should focusing on multicultural and mainstream.

If we successfully set up high performance clinics using herbal extract tea as prescription, with appropriate advertising and promotion, we are easily expand the customer base within a very time.

3.5 RESTRICTIONS AND NEGATIVE SIDE OF TRADITIONAL CHINESE MEDICINE

At the moment, there are some restriction and negative side of Traditional Chinese medicine such as:
- Chinese Medicine lacks strict contrast tests and objectively rigid norms to prove its curative effect.
- Most Chinese Medicine does not have systematic, pharmacologically and toxicologically experience data.

In this situation, the western community sometimes have doubts and disbelief on Chinese medicine.

Another negative side is the Traditional Chinese medicine does not wholly fitted into the insurance claiming territory in North America.

We need some times to educate the people and we believe that gradually, after they have understood more about TCM, the negative side will disappear very soon.

3.3 COMPETITION

Basically, In Chinese communities, Chinese medicines, acupuncture, massage, and other natural treatment are very popular in North America. Clinics and Medical Centres are located around the major cities in Canada and United States of America. However, most of them are small scale and not in a professional manners. The qualifications and the experiences of the practitioners are not uniform and standardized. The profile and the "packaging" of the Practitioners are low. Although a lot of patients want to acquire the service and products, they do not know how and where to get an appropriate clinic or medical centre.
The purposes of Sanjiu TCM Medical Centre is to establish a reputation of leading clinics and medical centres in Traditional Chinese Medicine. So that any patient who thinking of Traditional Chinese Medicine, will choose Sanjiu Medical Centre first.
Although there are TCM Clinics and medical centres in most of the major cities in North America, relatively most of them cannot scope with the requirement of the patients. In the coming 10 years, we estimate that there are 35% grow annually in the patient of Traditional Chinese medicine in North America. The level of competition is relatively extremely small especially if your location is located in a little remote areas.
Our Sanjiu Medical Centres and clinics use single herbal extract teas as prescription of Chinese Medicine formula. They are the most innovative, revelatory and unique products in the market.
So far, there are no the similar kind of TCM Clinics or Medical centre with wide name recognition in North America. No other clinics and offer the same products and services.

3.4 YOUR ABILITY TO OPERATE THE BUSINESS

If you are a TCM Practitioner, you are able to master your patient and the herbal extract tea. You have full control to maintain your patient and customer base. We shall provide you all management tools such as patient and herbal extract management system, clinics management accounting systems, training and etc. to help you and enable you to start and maintain the effective business immediately even you do not have any management and business experience.
This business is a very dynamic and flexible. It can be expanded quickly by simply employing more practitioners and prolong the business hour. Alternatively you can extract the business easily if it is not satisfactory. You could even conduct the business alone if you must lay off personnel to cut costs.
If you are not a TCM Practitioner, we shall provide you professional practitioners and provide all necessary training to enable a successful business

3.5 NAME RECOGNITION

A primary reason for your partnership with us is the right to associate with our great company's name. SANJIU is widely recognized worldwide and has a world known registered trademark. It will draw customers who know its products or services. If you stand in front of the TIME SQUARE in New York City for 5 minutes, you would be able to see our trademark appearing on the TIME SQUARE Billboard. Sanjiu have been in operation for more than 15 years and is a world class company. The company has a reputation for providing topnotch products and services.

3.6 TRAINING AND SUPPORT SERVICES

Our partners will receive unparalleled support and training from SANJIU and from 999 E-Tech Inc.. The support and training is not just the once, but is continuous.
The training comes in many aspects,
1. Management training for operations and management of the Medical Center.
2. Training of TCM Practitioners to acquire the most updated information, technology and technique. Usage of new instruments and treatment methods.
3. Computer training to fusing technology with the clinic's operations.
4. Acquire new professional with the right academic qualifications from China and other countries.

3.7 OUR EXPERIENCES

SANJIU has been in the healthcare business for more than 15 years. It started from a small company of 5 people to a world class company with annual turnover of US$ and asset of US$ . We are experienced in building successful businesses.
SANJIU is also experienced in operating franchise businesses as we have more than 150 franchise TCM stores in China. Our guidance, support, and training are proved to be reliable and solid.

3.8 GROWTH

Our project is a fast growing franchise system which increases the franchisor's name recognition and will attract a lot of customers and patients on your behalf. SANJIU is a well-established and aggressive company with strong financial background, asset and staff to your support.

3.9 THE RIGHT TO CARRY PRODUCTS OTHER THAN THE PRODUCTS OF
SANJIU

Sanjiu TCM Medical Centres will concentrate theirs sales on services and the products of Sanjiu. However, with prior approval of Sanjiu, the franchisees may be allowed to carry products related to healthcare produced by other manufacturers.

PART IV TERMS AND CONDITIONS

4.1 FRANCHISEE'S INITIAL FRANCHISEE FEE AND OTHER INITIAL PAYMENTS

The initial franchise fee or Royalty payment to begin the operation is CAD$3,000. To express our gratitude to our most dedicated partners, however, we will waive both payments for the first thirty successful applicants.

4.2 FEES FOR TRAINING

The followings are other fees to be paid on the franchisees' part:
1. Training fees:- $100 per day for the initial setting up training (training sessions are limited to one principal participant per franchisee only and is mandatory)
2. A field trip to China is optional.

4.4 CONTINUING ROYALTY PAYMENTS

Franchisee will pay to the franchiser five percent (5%) of the franchisee's gross sales for the products and services that bear the name, or related to "SANJIU", as well as one and a half percent (1.5%) of the franchisee's gross sales for the products other than those supplied or related to "SANJIU".

4.6 FRANCHISEE'S PRINCIPAL OBLIGATIONS

4.61. The principle obligations of the Franchisees are
1. Operate the Sanjiu Medical Center or Clinic according to the Agreement
2. Use single herbal extract tea as the primary prescription for the patient
3. Sell the Chinese herbal medicines and formula produced by Sanjiu

4.62. OBLIGATIONS OF THE FRANCHISER; SUPERVISION, ASSISTANCE; SERVICES

1. The franchiser SANJIU has obligations of supplying the single herbal extract tea all the time without interruption.
2. SANJIU as has obligations to provide training, support in the management of the medical center or clinic.

4.63. EXCLUSIVE AREA OR TERRITORY

1. SANJIU has identified numbers of clinics or medical center is a area or territory. The maps of the area and territory are shown in enclosure "A.".
2. The area or territory is exclusively for a particular franchisee. Sanjiu will not open or allow any operators to open another Center or clinic without the agreement of that franchisee.

4.64. PATENTS AND COPYRIGHTS

The Franchisee will conduct its business under the name "SANJIU E-TECH INC." promptly upon the execution of agreement. Promptly upon the expiration of the agreement, franchisee will revoke or terminate such assumed name registration. If franchisee will fail to do so, SANJIU E-TECH INC. will act on its behalf.

4.65. Commitment on the franchisee's part to personally participate in the operation of the franchise business

4.66. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

Franchisee may choose, but not obliged, to enter into a new franchisee agreement in the form then being offered after the expiration of the 5-year term of the current agreement. Please refer to Section 3.3 of the Agreement for details regarding the form and manner of renewal.

4.67. COMMITMENT OF A FRANCHISEE TO PURCHASE OR LEASE FROM A DESIGNATED SOURCE

1. There is no commitment of a franchisee to lease of the office or medical center from designated source.
2. There is a commitment of a franchisee to use exclusively Sanjiu Single Herbal Extract Tea for the prescription of the patient. No physical herbs or other brand named herbal tea is allowed excepted written approval from Sanjiu is

4.68. EVALUATION OF PERFORMANCE AND GUARANTEE OF SUCCESS IN YOUR BUSINESS

We shall assist the operator in starting the business and help maintain its success. The franchisee will be advised to follow the procedures of the handbook to operate the business. As well, monthly visit by the franchiser will be of great benefits to the franchisee in providing counsel and broad directions. However, the success of a medical centre does rely on diligence on the franchisee's part to which it is beyond SANJIU's jurisdiction to monitor.

4.69. OTHER COSTS

Our objective is to deliver Traditional Chinese Medicine to the world and to expand this opportunity to the TCM practitioners as well as operators who have the same vision and interest. We are prepared to waive most of the royalty payment (fee) for the first 100 operators and reduce part of the franchisee fee for the first year. This will greatly reduce the risk on the operator's part. All applicable fees are as follows, please refer to Agreement for terms and detailed calculations.
- Continuing royalty payments
- Advertising payments, both to local and national advertising funds.
- Grand opening or other initial business promotions.
- Business or operating licenses.
- Product or service supply costs.
- Real estate and leasehold improvements.
- Discretionary equipment such as a computer system or business alarm system.
- Training.
- Legal fees.
- Financial and accounting advice.
- Insurance.
- Compliance with local ordinances, such as zoning, waste removal, and fire and other safety codes.
- Health insurance.

Modern Chinese Medicines