Share Transfer Agreement

Share Transfer Agreement

EXECUTION COPY








SHARE TRANSFER AGREEMENT





BETWEEN



Stewart Shiang Lor



AND



Transferees







Date: January 16, 2008







THIS SHARE TRANSFER AGREEMENT (this "Agreement") is made on January 16, 2008 by and among Stewart Shiang Lor (the "Transferor") and each of the individuals listed in Schedule A hereto (collectively the "Transferees" and each a "Transferee").

The Transferor and the Transferees are collectively referred to as the "Parties" and each of them as a "Party".

Whereas, the Transferor is the sole shareholder of Time Poly Management Ltd. (the “Company”), which is one of the registered shareholders of the Raygere Limited, a British Virgin Islands Company, which intends to complete a business combination with a public shell company, traded on the Over the Counter Bulletin Board (the "Listed Company"), holding 50,000 Ordinary Shares in the Company as of the date of this Agreement.

Whereas, the Transferees have contributed to the wealth growth of the Transferor through the growth of the Company, the Listed Company and its PRC subsidiaries and affiliates (collectively with the Company, the “Group”).  In consideration of the Transferees’ contributions and as an incentive to the Transferees to continue their commitment to the Group, the Transferor has agreed to grant to each of the Transferees, and each Transferee has agreed to accept from the Transferor, an option (the “Option”) to purchase certain number of ordinary shares of the Company currently held by the Transferor (the "Option Shares") as set forth in Schedule A hereto, on the terms and subject to the conditions set out in this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1.

DEFINITIONS


1.1.

Defined Terms : In this Agreement (including the Recitals and the Schedules), unless the context otherwise requires, the following words and expressions shall have the following meanings:


“Alternate Exercise Price” means the exercise price to be paid by a Transferee to the Transferor in respect of the Option Shares issued to such Transferee as set forth opposite his/her name in Schedule A in the event that the Performance Targets (as defined herein) have not been met by the Group;


 

"Business Day" means a day (other than Saturdays, Sundays and public holidays) on which banks are generally open for business in China;

 

 

"China" or "PRC" means the People's Republic of China;

 

 

"Completion Date" means the date falling seven (7) Business Days after the service of the Exercise Notice by the Transferees on the Company;

 

 

"Completion" means the completion of the sale to and purchase by the Transferees of the Option Shares under this Agreement, which shall not be later than November 15, 2008;

 

 

"Distributions" means any cash proceeds arising from or in respect of, or in exchange for, or accruing to or in consequence of the Option Shares from the Effective Date to the Completion Date, including without limitation the Dividends.



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"Dividends" means the dividends declared by the Company and accrued in respect of the Option Shares (whether or not such dividends shall have been paid and received by the Transferees);

 

 

"Effective Date" means the date of this Agreement;

 

 

"Exercise" means the exercise by a Transferee or his/her Nominee(s) of the Option pursuant to the terms of this Agreement;

 

 

"Exercise Notice" means the notice substantially in the form set out in Part I of Schedule B;

 

 

"Exercise Price" means the exercise price to be paid by a Transferee to the Transferor in respect of the Option Shares issued to such Transferee as set forth opposite his/her name in Schedule A;

 

 

"Nominee" means such person nominated by a Transferee in the Transfer Notice to be the transferee of the Option or Option Shares;

 

 

"Option Effective Dates" have the meaning ascribed to them in Clause 2.3;

 

 

"Performance Targets" have the meaning ascribed to them in Clause 3;

 

 

"RMB" means the lawful currency of China;

 

 

Acquisition” means the transaction wherein the Listed Company will acquire 100% equity interest (whether directly or through its subsidiaries) of the Chengdu Tianyin Pharmaceutical Co., Ltd. (成都天银制药有限公司);

 

 

"Transfer Notice" means the notice substantially in the form set out in Part II of Schedule B;

 

 

"US$" or "United States Dollar" means the lawful currency of the United States of America.


"Euro €" means the lawful currency of the European Union.


1.2.

Interpretation: Except to the extent that the context requires otherwise:


1.2.1

words denoting the singular shall include the plural and vice versa; words denoting any gender shall include all genders; words denoting persons shall include firms and corporations and vice versa;


1.2.2

any reference to a statutory provision shall include such provision and any regulations made in pursuance thereof as from time to time modified or re-enacted whether before or after the date of this Agreement and (so far as liability thereunder may exist or can arise) shall include also any past statutory provisions or regulations (as from time to time modified or re-enacted) which such provisions or regulations have directly or indirectly replaced;


1.2.3

the words "written" and "in writing" include any means of visible reproduction;


1.2.4

any reference to "Clauses", "Recitals" and "Schedules" are to be construed as references to clauses and recitals of, and schedules to, this Agreement; and


1.2.5

any reference to a time of day is a reference to China time unless provided otherwise.




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1.3.

Headings: The headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement.


2.

OPTION


2.1.

Option: In consideration of the contributions which the Transferees have made to the Group and their continuing commitment to the Group, the Transferor hereby irrevocably and unconditionally grants to each of the Transferees the Option for such Transferee to acquire from the Transferor, at the Exercise Price or the Alternative Exercise Price, at any time during the Exercise Period (defined below) any or all of the Option Shares set forth opposite his/her name in Schedule A hereto, free from all claims, liens, charges, pledges, mortgages, trust, equities and other encumbrances, and with all rights attaching thereto on the Completion Date.


2.2.

Vesting Schedule: Subject to the terms and conditions hereto, the Option may be exercised, in whole or in part, in accordance with the following schedule:


The Option Shares subject to the Option shall vest at the rate of one-third (1/3) per Performance Period (as defined in Exhibit A).  


2.3.

Exercise Period: Once the Acquisition has been completed or abandoned pursuant to the terms of the definitive agreement regarding the Acquisition, the Option shall be exercisable in accordance with and on the dates set forth in Exhibit A (the “Option Effective Dates”). Subject to the vesting schedule set forth in Section 2.2 of this Agreement, the Option may be exercised by any Transferee (or his/her Nominee on behalf of the Transferee) at any time following the Option Effective Date (“Exercise Period”).


2.4.

Nominees: Each of the Transferees may, at any time during the Exercise Period, at his/her sole discretion, nominate one or more person(s) (each a “Nominee”) to be the transferee(s) of whole or part of his/her Option, who shall hold and/or exercise the transferred Option on behalf of the Transferee.


2.5.

Exercise Notice: The Option may be exercised by any Transferee or his/her Nominee(s), in whole or in part, at any time during the Exercise Period, by serving an Exercise Notice on theTransferor.


2.6.

Exercise: The Transferor agrees that he shall, upon receipt of the Exercise Notice and payment of either the Exercise Price or the Alternative Exercise Price, depending on whether the Performance Targets have been met, issue to the Transferee(s) (or his/her Nominee(s), as the case may be) any and all of the Option Shares specified in the Exercise Notice, free from all claims, liens, charges, pledges, mortgages, trust, equities and other encumbrances, and with all rights now or hereafter attaching thereto.  The Option shall be exercisable only in compliance with PRC laws and regulations and the Transferee(s) (or his/her Nominee(s), as the case may be) shall complete any and all approval or registration procedures regarding the exercise of his/her Option at PRC competent authorities in accordance with applicable PRC laws and regulations.


2.7.

Transfer Notice: In case that any Transferee transfers any or all of his/her Option to one or more Nominee(s) in accordance with Clause 2.4 above, the Transferee shall serve a Transfer Notice on the Transferor.


2.8.

Transfer to Nominees: The Transferor agrees that he shall, upon receipt of the Transfer Notice, take all actions necessary to allow the Nominee(s) to be entitled to any or all of the Options specified in the Transfer Notice.




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Upon exercise by any Nominee(s) of the transferred Option on behalf of the Transferee, the Transferee shall serve the Exercise Notice on the Transferor in his/her own name for the exercising Nominee(s).  Upon receipt of such Exercise Option, the Transferor shall issue to such Nominee(s) any and all of the relevant Option Shares in the same manner as specified in Clause 2.6.


2.9.

Payment of Exercise Price: Upon Exercise of the Option in whole or in part, the exercising Transferee (or his/her Nominee(s), as the case may be) shall pay the Exercise Price to the Transferor.

  

2.10.

The Transferor’s Obligation upon Exercise: The Transferor agrees that upon the Exercise of any Option by any Transferee (or his/her Nominee(s)), he shall cause and procure the number of Option Shares provided in the Exercise Notice to be transferred to such exercising Transferee (or his/her Nominee(s)) within seven (7) Business Days after the date of the Exercise Notice.


3.

PERFORMANCE TARGET AND CONDITION PRECEDENT


3.1.

The obligation of the Transferor to effect the Option and the transfer of the Option Shares at the Exercise Price to an exercising Transferee upon his/her Exercise of the Option shall be subject to the fulfilment of the following conditions (the “Performance Targets”) set forth in Exhibit A hereto.  In the event that the Group does not achieve the Performance Targets specified in Exhibit A, then the Transferee may exercise the Option at the Alternative Exercise Price on the date at which the Option would have otherwise been exercisable had the Performance Targets been met.  


4.

INFORMATION, DISTRIBUTIONS AND ADJUSTMENTS


4.1.

Information: Each of the Transferees (the "Requesting Transferees") shall be entitled to request from the Transferor at any time before the Completion, a copy of any information received from the Group which may be in the possession of the Transferor and, upon such request, the Transferor shall provide such information to the Requesting Transferee(s).


4.2.

Distributions: The Transferor agrees that each of the Transferees shall be entitled to all the Distributions in respect of his/her Option Shares.  In the event that any such Distributions have been received by the Transferor for any reason, the Transferor shall, at the request of the relevant Transferee, pay an amount equivalent to the Distributions received by him/her to such Transferee at the time of the Option Exercise by the Transferee.


4.3.

Adjustments: If, prior to the Completion, the Company shall effect any adjustment in its share capital (such as share split, share dividend, share combination or other similar acts), then the number of Option Shares to be issued to the Transferee upon Exercise shall be adjusted accordingly to take into account such adjustment.


5.

COMPLETION


5.1.

Time and Venue: Completion of the sale and purchase of the Option Shares pursuant to the Exercise shall take place at such place decided by the exercising Transferee(s) on the Completion Date.


5.2.

Business at Completion: At Completion of each Exercise, all (but not part only) of the following shall be transacted:


5.2.1

the exercising Transferees shall pay the Exercise Price to the Transferor in cash;




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5.2.2

the Transferor shall cause the Company to within seven (7) Business Days after the date of Exercise Notice, deliver to each of the exercising Transferees (or his/her Nominee(s), same below) the following documents and take all corporate actions necessary to give effect to such delivery:


(a)

a share certificate or share certificates in respect of the number of the Option Shares exercised by such exercising Transferee;


(b)

a certified true copy of the register of members of the Company updated to show the entry of the exercising Transferee as the holder of the Option Shares so exercised; and


(c)

any other documents as the exercising Transferee may reasonably believe necessary to give effect to the issuance of the exercised Option Shares.


6.

CONFIDENTIALITY


The transaction contemplated hereunder and any information exchanged between the Parties pursuant to this Agreement will be held in complete and strict confidence by the concerned Parties and their respective advisors, and will not be disclosed to any person except: (i) to the Parties’ respective officers, directors, employees, agents, representatives, advisors, counsel and consultants that reasonably require such information and who agree to comply with the obligation of non-disclosure pursuant to this Agreement; (ii) with the express prior written consent of the other Party; or (iii) as may be required to comply with any applicable law, order, regulation or ruling, or an order, request or direction of a government agency; provided, however, that the foregoing shall not apply to information that: (1) was known to the receiving Party prior to its first receipt from the other Party; (2) b ecomes a matter of public knowledge without the fault of the receiving Party; or (3) is lawfully received by the Party from a third person with no restrictions on its further dissemination.


7.

TRANSFEROR’S UNDERTAKINGS


Without the prior written consent of all the Transferees, the Transferor shall vote his shares in the Company such that the Company shall not, (i) issue or create any new shares, equity, registered capital, ownership interest, or equity-linked securities, or any options or warrants that are directly convertible into, or exercisable or exchangeable for, shares, equity, registered capital, ownership interest, or equity-linked securities of the Company, or other similar equivalent arrangements, (ii) alter the shareholding structure of the Company, (iii) cancel or otherwise alter the Option Shares, (iv) amend the register of members or the memorandum and articles of association of the Company, (v) liquidate or wind up the Company, or (vi) act or omit to act in such a way that would be detrimental to the interest of the Transferees in the Option Shares.  The Transferor shall cause the Company to disclose to the Transferees true copies of all the financial, legal and commercial documents of the Company and the resolutions of the shareholders and the board of directors.


8.

MISCELLANEOUS


8.1.

Indulgence, Waiver Etc: No failure on the part of any Party to exercise and no delay on the part of such Party in exercising any right hereunder will operate as a release or waiver thereof, nor will any single or partial exercise of any right under this Agreement preclude any other or further exercise of it or any other right or remedy.


8.2.

Effective Date and Continuing Effect of Agreement: This Agreement shall take effect from the Effective Date.  All provisions of this Agreement shall not, so far as they have not been performed at Completion, be in any respect extinguished or affected by Completion or by any



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other event or matter whatsoever and shall continue in full force and effect so far as they are capable of being performed or observed, except in respect of those matters then already performed.


8.3.

Successors and Assigns: This Agreement shall be binding on and shall ensure for the benefit of each of the Parties' successors and permitted assigns. Any reference in this Agreement to any of the Parties shall be construed accordingly.


8.4.

Further Assurance: At any time after the date of this Agreement, each of the Parties shall, and shall use its best endeavors to procure that any necessary third party shall, execute such documents and do such acts and things as any other Party may reasonably require for the purpose of giving to such other Party the full benefit of all the provisions of this Agreement.


8.5.

Remedies: No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise, and each and every other remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise. The election of any one or more of such remedies by any Party shall not constitute a waiver by such Party of the right to pursue any other available remedies.


8.6.

Severability of Provisions: If any provision of this Agreement is held to be illegal, invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, continue to be valid as to its other provisions and the remainder of the affected provision; and the legality, validity and enforceability of such provision in any other jurisdiction shall be unaffected.


8.7.

Governing Law: This Agreement shall be governed by, and construed in accordance with, the laws of the British Virgin Islands.


8.8.

Dispute Resolution: In the event of any dispute, claim or difference (the "Dispute") between any Parties arising out of or in connection with this Agreement, the Dispute shall be resolved in accordance with the following:

(a)

Negotiation between Parties; Mediations.  The Parties agree to negotiate in good faith to resolve any Dispute.  If the negotiations do not resolve the Dispute to the reasonable satisfaction of all parties within thirty (30) days, subsection (b) below shall apply.

(b)

Arbitration.  In the event the Parties are unable to settle a Dispute in accordance with subsection (a) above, such Dispute shall be referred to and finally settled by arbitration at Hong Kong International Arbitration Centre in accordance with the UNCITRAL Arbitration Rules (the “UNCITRAL Rules”) in effect, which rules are deemed to be incorporated by reference into this subsection (b).  The arbitration tribunal shall consist of three arbitrators to be appointed according to the UNCITRAL Rules.  The language of the arbitration shall be English.


8.9.

Counterparts: This Agreement may be signed in any number of counterparts, all of which taken together shall constitute one and the same instrument.  Any Party hereto may enter into this Agreement by signing any such counterpart.


[SIGNATURE PAGE FOLLOWS]




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IN WITNESS WHEREOF the Parties hereto have executed this Agreement on the date first above written.


The Transferor




By: _____________________

Stewart Shiang Lor



The Transferee


  

By: ____________________­­­­­­­­­­_______         

Name: Mr. Guoqing Jiang (江国庆)

 

By: _____________________

Name: Mr. Yong Zhan (詹勇)

 

By: ___________________________

Name: Mr. Xintao You (游心涛)

 

By: _____________________

Name: Ms. Li Zhou (周莉)

 

By: ___________________________

Name: Mr. Daqiao Zhang (张大桥)

 

By: _____________________

Name: Mr. Hongcai Li (李洪才)


 




[SIGNATURE PAGE TO INCENTIVE OPTION AGREEMENT]





EXHIBIT A


PERFORMANCE TARGETS


A.

The Group shall have generated a gross revenue of

(i) at least RMB 26,000,000 for three months commencing from January 1, 2008 to March 31, 2008 (the “March Performance Period”);

(ii) at least RMB 26,500,000 for three months commencing from April 1, 2008 to June 30, 2008 (the “June Performance Period”);

(iii) at least RMB 27,000,000 for three months commencing from July 1, 2008 to September 31, 2008 (the “September Performance Period” and together with the March Performance Period and the June Performance Period, the “Performance Period”).



B.

The Option Effective Date for each Performance Period shall be that date that is forty five (45) days following the last day of each such Performance Period.










SCHEDULE A


Transferees and Option Shares



Transferees

ID Card Number

Number of
Option Shares

Exercise Price

Alternate Exercise Price

Mr. Guoqing Jiang

江国庆

321111196703070812

38,429

US$330,487

US$660,975

Mr. Xintao You

游心涛

510102196203255317

3,837

US$32,998

US$65,996

Mr. Yong Zhan

詹 勇

610103196911153610

3743

US$32,193

US$64,387

Ms. Li Zhou

周 莉

51011119580915116X

2714

US$23,340

US$46,680

Mr. Daqiao Zhang

张大桥

321102680917191

1126

US$9,688

US$19,376

Mr. Hongcai Li

李洪才

510213197310083775

150

US$1,293

US$2,586





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SCHEDULE B


Part I


Form of Exercise Notice





To

:

Stewart Shiang Lor (the “Transferor”)


From

:

[  ] (the “Transferee”)



We refer to the Share Transfer Agreement (the "Share Transfer Agreement") dated December 28, 2007 made between the Transferee and the Company.  Terms defined in the Option Agreement shall have the same meanings as used herein.


We hereby give you notice that we require you to sell to us / [Nominees' names] in accordance with the terms and conditions of the Share Transfer Agreement, the following Option Shares at the Exercise Price set out below, subject to the terms and conditions set out in the Share Transfer Agreement. Completion shall take place at [    ] on [                ] at the office of [    ].



Transferee

Option Shares

Exercise Price/Alternative Exercise Price

   



Dated [   ]  



Yours faithfully



___________________________

Name:

Title:

For and on behalf of

[Transferee]









Party II


Form of Transfer Notice




To

:

Stewart Shiang Lor (the “Transferor”)


From

:

[  ] (the “Transferee”)



We refer to the Share Transfer Agreement (the "Share Transfer Agreement") dated December 28, 2007 made between the Transferee and the Company.  Terms defined in the Option Agreement shall have the same meanings as used herein.


We hereby give you notice that we will transfer to [Nominees' names] the following portion of the Option, expressed in terms of the number of Option Shares represented by the portion of the Option transferred in accordance with the terms and conditions of the Share Transfer Agreement,.



Transferee

Nominees

Option Shares Represented

Mr. Guoqing Jiang

  

Mr. Xintao You

  

Mr. Yong Zhan

  

Ms. Li Zhou

  

Mr. Daqiao Zhang

  

Mr. Hongcai Li

  



Dated [     ]



Yours faithfully



___________________________

Name:

Title:

For and on behalf of

[Transferee]