Exhibit 2.1
STOCK EXCHANGE AGREEMENT
This Agreement dated as of the 8th day of February, 2006, by and among
Xxxxxxxxxx Holdings III, Inc., a Delaware corporation having its offices at c/o
Xxxxx Xxx, 00 Xxxxxxx Xxxxx, Xxxxx X-00, Xxxx Xxxxxxx Professional Center,
Xxxxxxxxx Xxxxxxxx, XX 00000 (the "Issuer"), Guangzhou Konzern Medicine Co.
Ltd., a Chinese company qualified to be a wholly owned foreign enterprise, known
as a "WOFE," with offices at Xxxx 000, Xxxxxxx Xxxxxxx Xx. 0, Xxxxx Xxxxxx Xin
Chengsi, China ("Konzern"), and the individuals named on Schedule A to this
Agreement (collectively, the "Stockholders" and each, individually, a
"Stockholder").
W I T N E S S E T H:
WHEREAS, the Stockholders are the holders of all of the issued and
outstanding capital of Konzern (the "Konzern Shares"); and
WHEREAS, the Issuer desires to acquire all of the Konzern Shares, which
represent all of the capital of Konzern, from the Stockholders, and is willing
to issue shares of its common stock, par value $.0001 per share ("Common
Stock"), to the Stockholders in exchange for the Konzern Shares on and subject
to the terms and conditions of this Agreement; and
WHEREAS, the Stockholders have executed an agreement pursuant to which
they agreed to transfer the Konzern Shares to the Issuer for a consideration of
24,280,000 yuan, which payment may be made in cash or in securities of the
Issuer on terms acceptable to the Stockholders; and
WHEREAS, this Agreement sets forth the terms and conditions on which the
Stockholders are transferring the Konzern Shares to the Issuer; and
WHEREAS, Konzern has obtained all necessary government approval for the
transfer by the Stockholders of all of the Konzern Shares to the Issuer, and the
transfer of the Konzern Shares is being consummated in full compliance with all
Chinese government authorizations;
NOW, THEREFORE, for the mutual consideration set out herein, the parties
agree as follows:
1. Exchange of Shares.
(a) Issuance of Shares by Issuer. On and subject to the conditions
set forth in this Agreement, the Issuer will issue to Stockholders, in exchange
for all of the capital of Konzern, which is represented by the Konzern Shares,
an aggregate of 6,530,000 shares of Common Stock (the "Shares"). The Shares will
be issued to the Stockholders in the amounts set forth after their respective
names in Schedule A to this Agreement.
(b) Transfer of Konzern Shares by the Stockholders. On and subject
to the conditions set forth in this Agreement, the Stockholders will transfer to
the Issuer all of the Konzern Shares in exchange for the Shares. Each
Stockholder holds the number of Konzern Shares set forth after his or her name
in Schedule A to this Agreement.
(c) Closing. The issuance of the Shares to the Stockholders and
the transfer of the Konzern Shares to the Issuer will take place at a closing
(the "Closing") to be held at the office of Katsky Xxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 as soon as possible after or contemporaneously with the
satisfaction or waiver of all of the conditions to closing set forth in Sections
4 and 5 of this Agreement.
(d) Closing Escrow. Prior to the Closing, the Stockholders will
deliver to Katsky Xxxxxx LLP, as Escrow Agent, the certificates for, or other
evidence of, ownership of the Konzern Shares pursuant to an escrow agreement in
substantially the form of Exhibit A to this Agreement. The escrow agreement will
provide that the Konzern Shares shall be transferred to the Issuer
contemporaneously with the delivery of the Shares to the Stockholders.
2. Representations and Warranties of the Issuer. The Issuer hereby
represents and warrants to the Stockholders as follows:
(a) General.
(i) The Issuer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Issuer does not have any equity investment or other interest, direct or
indirect, in, or any outstanding loans, advances or guarantees to or on behalf
of, any domestic or foreign corporation, limited liability company, association,
partnership, joint venture or other entity.
(ii) Complete and correct copies of the Issuer's certificate
of incorporation and by-laws are available for review on the XXXXX system
maintained by the U.S. Securities and Exchange Commission (the "Commission").
(iii) The Issuer's authorized capital stock consists of
10,000,000 shares of preferred stock, par value $.0001 per shares, none of which
are issued or outstanding, and 90,000,000 shares of Common Stock, of which
1,028,000 shares are issued and outstanding. Pursuant to a separate agreement,
the Issuer is acquiring 928,000 shares of Common Stock contemporaneously with
the Closing.
(iv) The Issuer has full power and authority to carry out the
transactions provided for in this Agreement, and this Agreement constitutes the
legal, valid and binding obligations of the Issuer, enforceable in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency and other laws of general application affecting the
enforcement of creditor's rights and except that any remedies in the nature of
equitable relief are in the discretion of the court. All necessary action
required to be taken by the Issuer for the consummation of the transactions
contemplated by this Agreement has been taken.
(v) The Shares, when issued pursuant to this Agreement, will
be duly and validly authorized and issued, fully paid and non-assessable. The
issuance of the Shares to Stockholders is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to an exemption provided by Section 4(2) thereunder.
(vi) Except as contemplated by this Agreement and as
disclosed in Schedule B to this Agreement, the Issuer is not a party to any
agreement or understanding pursuant to which any securities of any class of
capital stock are to be issued or created or transferred, and the Issuer does
not have any agreements, plans, understandings or proposals, whether formal or
informal or whether oral or in writing, pursuant to which it or he granted or
may have issued or granted any individual or entity any Convertible Securities
or any interest in the Issuer or the Issuer's earnings or profits, however
defined. As used in this Agreement, the term "Convertible Securities" shall mean
any options, rights, warrants, convertible debt, equity securities or other
instrument or agreement upon the exercise or conversion of which or upon the
exchange of which or pursuant to the terms of which additional shares of any
class of capital stock of the Issuer may be issued.
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(b) Financial.
(i) The Issuer's audited balance sheet at April 30, 2005 and
the statements of operations, stockholders' equity and cash flows and notes
thereto for the period from February 10, 2005 (inception) through April 30,
2005, audited by Xxxxxx & Xxxxxxxx, LLP, are included in the Issuer's Form 10SB,
and its unaudited balance sheet at September 30, 2005 and the related statements
of operations and cash flows for the three months ended September 30, 2005 and
the period from February 10, 2005 (inception) to September 30, 2005 are included
in the Issuer's Form 10-QSB. Such Issuer Financial Statements are collectively
referred to as the "Issuer Financial Statement" and have been made available to
the Stockholder on the XXXXX system of the Commission. The Issuer Financial
Statements are in accordance with all books, records and accounts of the Issuer,
have been prepared in accordance with generally accepted accounting principles,
consistently applied, except that the Issuer Financial Statements for the period
ended September 30, 2005 do not include statements or other information which is
not required to be included in a Form 10-X. Xxxxxx & Kleigman, LLP is
independent as to the Issuer under the rules of the Commission pursuant to the
Securities Act. The Issuer Financial Statements present fairly the financial
position of the Issuer at the respective balance sheet dates, and fairly present
the results of the Issuer's operations, changes in stockholders' equity and cash
flows for the periods covered in accordance with generally accepted accounting
principles consistently applied. The Issuer Financial Statements for the periods
ended September 30, 2005 include all adjustments (which include only normal
recurring adjustments) necessary to present fairly the information for such
period.
(ii) At the close of business on September 30, 2005, the
Issuer did not have any material liabilities, absolute or contingent, of the
type required to be reflected on balance sheets prepared in accordance with
generally accepted accounting principles which are not fully reflected, reserved
against or disclosed on the September 30 balance sheet. The Issuer has not
guaranteed or assumed or incurred any obligation with respect to any debt or
obligations of any Person, except endorsements made in the ordinary course of
business in connection with the deposit of items for collection and except as
disclosed in the Issuer Financial Statements and the SEC Documents, as
hereinafter defined. The Issuer has no debts, contracts, guaranty, standby,
indemnity or hold harmless commitments, liabilities or obligations of any kind,
character or description, whether accrued, absolute, contingent or otherwise, or
due or to become due except to the extent set forth or noted in the Issuer
Financial Statement, and not heretofore paid or discharged or otherwise
specifically disclosed in the Schedules. As used in this Agreement, the term
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
governmental entity (or any department, agency or political subdivision
thereof).
(iii) Except as disclosed in the Issuer Financial Statements
and the SEC Documents, since September 30, 2005, there has not been any Material
Adverse Change affecting the Issuer or any damage or destruction, whether
covered by insurance or not, affecting the business, property or assets of the
Issuer, it being understood that the Issuer is not engaged in any active
business activity, but is incurring expenses in the normal course of operations
as a public company. A Material Adverse Change, with respect to any party to
this Agreement, means any material adverse change in the business, operations,
assets, financial condition, operating results, liabilities, employee relations
or prospects of such party or which would affect the ability of a party to
consummate the transactions contemplated by this Agreement. For purposes of this
Agreement, a change in a party's prospects shall not be deemed a Material
Adverse Change if such change resulted from general economic conditions,
including economic conditions applicable to a specific industry.
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(c) SEC Documents. The Issuer is registered pursuant to Section 12
of the Exchange Act and it current with its reporting obligations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). None of the
Issuer's filings made pursuant to the Exchange Act (collectively, the "Issuer
SEC Documents") contains any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Issuer SEC Documents, as of their respective dates, complied
in all material respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder, and are available on the
Commission's XXXXX system.
(d) Property. The Issuer does not owns any real property. The
Issuer does not own any intellectual property rights. None of the Issuer' assets
are subject to any encumbrances or other Claims. A "Claim" shall mean any
security interest, lien, pledge, claim, charge, escrow, encumbrance, option,
right of first refusal, mortgage, indenture, security agreement or other
agreement, arrangement, contract, commitment, understanding or obligation,
whether or not relating in any way to credit or the borrowing of money and
whether or not voluntarily incurred or arising under any law.
(e) Litigation. There are no material claims, actions, suits,
proceedings, inquiries, labor disputes or investigations (whether or not
purportedly on behalf of the Issuer) pending or, to the Issuer's Best Knowledge,
threatened against the Issuer or any of its assets, at law or in equity or by or
before any governmental entity or in arbitration or mediation. No bankruptcy,
receivership or debtor relief proceedings are pending or, to the best of the
Issuer's knowledge, threatened against the Issuer.
(f) Compliance with Laws. The Issuer has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign Law, judgment, decree, injunction or order,
applicable to it, the conduct of its business, or the ownership or operation of
its business. References in this Agreement to "laws" shall refer to any laws,
rules or regulations of any Chinese or United States, as the case may be,
federal, state or local government or any governmental or quasi-governmental
agency, bureau, commission, instrumentality or judicial body (including, without
limitation, any federal or state securities law, regulation, rule or
administrative order).
(g) Taxes. The Issuer has properly filed all tax returns required
to be filed and has paid all taxes shown thereon to be due. To the Best
Knowledge of the Issuer, all tax returns previously filed are true and correct
in all material respects. As used in this Agreement, a party's Best Knowledge
shall mean and include (i) actual knowledge and (ii) that knowledge which a
prudent businessperson would reasonably have obtained in the management of such
person's business affairs after making due inquiry and exercising the due
diligence which a prudent businessperson should have made or exercised, as
applicable, with respect thereto. Actual or imputed knowledge of any director or
officer of a party shall be deemed to be knowledge of the party.
(h) No Defaults.
(i) Except as disclosed in the Issuer Financial Statements
or in the SEC Documents, the Issuer has performed all material obligations
required to be performed by it, and the Issuer is not in default, in any
material respect, under any agreement to which it is a party except to the
extent that any such breach would not have a Material Adverse Effect.
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(ii) The Issuer is not in violation of its certificate of
incorporation or by-laws. The execution and delivery of this Agreement by the
Issuer and the consummation by the Issuer of the transactions contemplated by
this Agreement will not result in any violation of the Issuer's certificate of
incorporation or by-laws or any applicable law or be in conflict with,
constitute a default under, or result in a violation of, or give rise to any
right of termination, cancellation or acceleration under, any material agreement
to which the Issuer is a party or any court order or decree or other
governmental order or decree.
(i) No Broker. The Issuer has not employed or engaged any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement. The Issuer shall indemnify and hold Konzern and the Stockholders
harmless from and against any manner of loss, damage, liability or expense,
including reasonable fees and expenses of counsel, as a result of any fees or
commissions due to any finder or broker for compensation in connection with the
transactions contemplated by this Agreement. The obligations of the Issuer
pursuant to this Section 2(i) shall survive the Closing.
(j) Reliance by Stockholders. The representations and
warranties set forth in this Section 3, taken together, do not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained herein and therein, when taken together, not
misleading. Notwithstanding the foregoing, Stockholders acknowledges that no
representation or warranty is made by the Issuer with respect to any projections
made by the Issuer.
3. Representations and Warranties of Stockholders. The Stockholders
jointly and severally (except as to Section 3(b),of this Agreement as to which
the representations and warranties are several) represent and warrant to the
Issuer as follows:
(a) Organization.
(i) Konzern is a company, duly organized, validly existing
and in good standing under the laws of the People's Republic of China and has
full power and authority to carry on its business as and where such business is
operated. All necessary company action required to be taken by Konzern and the
Stockholders relating to the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement has been duly
and validly taken, and this Agreement constitutes the legal, valid and binding
and enforceable obligation of Stockholders, except as enforceability may be
limited by bankruptcy, insolvency and other laws of general application
affecting the enforcement of creditor's rights and that any remedies in the
nature of equitable relief are in the discretion of the court. All necessary
action required to be taken by Stockholders for the consummation of the
transactions contemplated by this Agreement has been taken, and all regulatory
approval of .
(ii) The execution and performance of this Agreement will not
violate or conflict with any provision of Konzern's certificate of
incorporation, by-laws or other organizational documents. No approval or consent
of, or notice to or filing with, any Person not a party to this Agreement or any
governmental or quasi-governmental agency, is necessary to authorize the
execution or delivery of this Agreement or the consummation of any of the
transactions contemplated herein by Stockholders other than approvals which have
been obtained or will have been obtained at or prior to Closing.
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(iii) The capital of Konzern is represented solely by the
Konzern Shares. Konzern is not a party to any agreement or understanding
pursuant to which any securities of any class of capital stock or any interest
in the capital of Konzern is to be issued or created or transferred, and Konzern
does not have any agreements, plans, understandings or proposals, whether formal
or informal or whether oral or in writing, pursuant to which it or he granted or
may have issued or granted any individual or entity any Convertible Securities
or any interest in Konzern or Konzern's earnings or profits, however defined.
(b) Several Representations by the Stockholders. Each Stockholder,
for himself or herself:
(i) Is the sole record and beneficial owner of the Konzern
Shares set forth after his or her name in Schedule A to this Agreement, subject
to no Claim.
(ii) Is a citizen and resident of China and is not a citizen
or resident of the United States of America.
(iii) Has full power and authority to carry out the
transactions provided for in this Agreement, and this Agreement constitutes the
legal, valid and binding obligations of such Stockholder, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency and other laws of general application affecting the
enforcement of creditor's rights and that any remedies in the nature of
equitable relief are in the discretion of the court. All necessary action
required to be taken by Stockholders for the consummation of the transactions
contemplated by this Agreement has been taken.
(iv) Is an accredited investor within the meaning of Rule 501
of the Commission pursuant to the Securities Act;
(v) Is acquiring the Shares pursuant to this Agreement for
investment and not with a view to the sale or distribution thereof;
(vi) Understands that the Shares constitute restricted
securities within the meaning of Rule 144 of the Commission pursuant to the
Securities Act and may not be sold or otherwise transferred except pursuant to
an effective registration statement or an exemption from the registration
requirements of the Securities Act;
(vii) Has been advised by counsel as to the meaning and
implication of the acquisition of restricted securities and the illiquid nature
of the Shares;
(viii) Acknowledges that the certificate or certificates for
the Shares will bear the Issuer's customary Securities Act restrictive legend;
(ix) Represents that he or she understands that an investment
in the Shares involves a high degree of risk; and
(x) Represents that the execution and performance of this
Agreement will not constitute a breach of any contract to which such Stockholder
is a party or by which he or she is bound, and will not violate any judgment,
decree, order, writ, rule, statute, or regulation applicable to such
Stockholders or his or her properties.
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(c) Financial Statements.
(i) Konzern has delivered to the Issuer the following
financial statements (collectively, the "Konzern Financial Statements"): Audited
balance sheet at December 31, 2004 and the statements of operations,
stockholders' equity, cash flow and notes thereto for the two years in the
period then ended, certified by Xxxxx Xxxxxxxx Xxxxx Xxxxxx and Xxxxxx, LLP, and
the unaudited balance sheet as of September 30, 2005 and the statements of
operations, cash flows and notes to financial statements for the nine months
ended September 30, 2005 and 2004 and stockholders' equity for the nine months
ended September 30, 2005, which have been reviewed, but not audited, by Xxxxx
Xxxxxxxx Xxxxx Xxxxxx and Xxxxxx, LLP. The Konzern Financial Statements are in
accordance with all books, records and accounts of Konzern, have been prepared
in accordance with United States generally accepted accounting principles
consistently applied and the requirements of the PACOB, except that the Konzern
Financial Statements for the period ended September 30, 2005 do not include
information which is not required to be included in a Form 10-X. Xxxxx Xxxxxxxx
Xxxxx Xxxxxx and Xxxxxx, LLP is independent as to the Issuer under the rules of
the Commission pursuant to the Securities Act. The Konzern Financial Statements
present fairly the financial position of the Issuer at the respective balance
sheet dates, and fairly present the results of Konzern's operations, changes in
stockholders' equity and cash flows for the periods covered in accordance with
generally accepted accounting principles consistently applied. The Konzern
Financial Statements for the periods ended September 30, 2005 include all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the information for such period.
(ii) At the close of business on September 30, 2005, Konzern
did not have any material liabilities, absolute or contingent, of the type
required to be reflected on balance sheets prepared in accordance with generally
accepted accounting principles which are not fully reflected, reserved against
or disclosed on the September 30 balance sheet. Konzern has not guaranteed or
assumed or incurred any obligation with respect to any debt or obligations of
any Person, except endorsements made in the ordinary course of business in
connection with the deposit of items for collection and except as disclosed in
the Konzern Financial Statements. Konzern has no debts, contracts, guaranty,
standby, indemnity or hold harmless commitments, liabilities or obligations of
any kind, character or description, whether accrued, absolute, contingent or
otherwise, or due or to become due except to the extent set forth or noted in
the Konzern Financial Statement, and not heretofore paid or discharged.
(iii) Except as disclosed in the Konzern Financial Statements,
since September 30, 2005, there has not been any Material Adverse Change
affecting Konzern or any damage or destruction, whether covered by insurance or
not, affecting the business, property or assets of Konzern.
(d) Property. Konzern has disclosed to Konzern any real property
owned by Konzern or leased by Konzern. None of Konzern's assets are subject to
any encumbrances or other Claims except as reflected in the Konzern Financial
Statements.
(e) Intellectual Property Rights.
(i) Konzern has all requisite right, title and interest in
or valid and enforceable rights to use all the intellectual property which it
believes is necessary to the conduct of its business as presently conducted,
including its rights to Konzern's products. Each item of the intellectual
property either is owned exclusively by Konzern, free and clear of any
encumbrances, or is licensed to Konzern under a valid license granting
sufficient rights to permit Konzern to conduct its business as presently
conducted. To Konzern's and the Stockholders' Best Knowledge, Konzern owns or
has the valid right to use all trademarks, service marks and trade names used by
Konzern in connection with the operation or conduct of Konzern's business,
including the sale of any products or technology or the provision of any
services by Konzern. Konzern owns exclusively, and has good title to, all
copyrighted works that are Konzern products or other works of authorship that
Konzern otherwise purports to own; provided, however, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to Konzern or are in the public domain.
Konzern has not transferred ownership of any intellectual property to any other
Person.
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(ii) The operation of the business of Konzern as currently
conducted, including Konzern's design, development, use, import, export,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of Konzern, to
Konzern's and the Stockholders' Best Knowledge, does not infringe the copyright
or misappropriate the trade secrets, patent rights or trademark rights of any
Person. Konzern has not received notice from any Person claiming that such
operation or any act, product, technology or service (including products,
technology or services currently under development) of Konzern infringes or
misappropriates the intellectual property of any Person or constitutes unfair
competition or trade practices under any law.
(iii) To Konzern's and the Stockholders' Best Knowledge, there
are no contracts between Konzern and any other Person with respect to
intellectual property under which there is any dispute regarding the scope of
such contract, or performance under such contract, including any dispute with
respect to any payments to be made or received by Konzern thereunder.
(f) No Defaults.
(i) Except as disclosed in the Konzern Financial Statement,
Konzern has performed all material obligations required to be performed by it,
and Konzern is not in default, in any material respect, under any agreement to
which it is a party except to the extent that any such breach would not have a
Material Adverse Effect.
(ii) Konzern is not in violation of its certificate of
incorporation, by-laws or other organizational instrument. The execution and
delivery of this Agreement by Konzern and the consummation by Konzern and the
Stockholders of the transactions contemplated by this Agreement will not result
in any violation of Konzern's certificate of incorporation, by-laws or other
organizational document or any applicable law or be in conflict with, constitute
a default under, or result in a violation of, or give rise to any right of
termination, cancellation or acceleration under, any material agreement to which
Konzern is a party or any court order or decree or other governmental order or
decree affecting Konzern.
(g) Compliance with Laws.
(i) Konzern has complied with, is not in violation of, and
has not received any notices of violation with respect to, any Chinese or other
law, judgment, decree, injunction or order, applicable to it, the conduct of its
business or the ownership or operation of its business, including drug
administration laws, regulations on drug's operation and quality control, food
hygiene laws, price, advertising and contract laws, company laws, currency laws
and regulations, and other laws affecting or relating to its business.
(ii) To the Best Knowledge of Stockholders and Konzern, (i)
Konzern is not in violation or, and has not received any written notice from any
governmental entity that there exists any violation of any law relating to the
use or disposal or any other dealing with hazardous substances which are
applicable to it, (ii) there are no hazardous substances present on, under or
about any of Konzern's property or assets, (iii) no discharge, spillage,
uncontrolled loss, seepage or filtration of hazardous substances has occurred
on, under or about any of Konzern's property or assets, (iv) none of Konzern's
property or assets violates, or has at any time violated, any hazardous
substance laws, and (v) that there is no condition on any asset for which
Konzern has an obligation to undertake any remedial action pursuant to and
hazardous substance laws. Terms used in this Section 3(g)(ii) shall have the
meaning accorded them under applicable Chinese law.
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(h) Litigation. There are no material claims, actions, suits,
proceedings, inquiries, labor disputes or investigations (whether or not
purportedly on behalf of Konzern) pending or, to Konzern's or any Stockholder's
Best Knowledge, threatened against the Issuer or any of its assets, at law or in
equity or by or before any governmental entity or in arbitration or mediation.
No bankruptcy, receivership or debtor relief proceedings are pending or, to the
best of the Issuer's knowledge, threatened against Konzern.
(i) Taxes. Konzern has properly filed all tax returns required to
be filed and has paid all taxes shown thereon to be due. To the Best Knowledge
of Konzern and the Stockholders, all tax returns previously filed are true and
correct in all material respects.
(j) Transactions with Affiliates. Except as disclosed in the
Konzern Financial Statements, and except invention assignment or confidentiality
agreements in favor of the Company:
(i) There are no material contracts between Konzern, on the
one hand, and any current officer, director, Stockholder or any of their
affiliates. An affiliate of any Person is a Person who controls, is controlled
by or is under common control with, such Person.
(ii) Konzern does not provide or cause to be provided any
assets, services or facilities to any such current officer, director,
Stockholder or affiliate.
(iii) No current officer, director, Stockholder or affiliate
provides or causes to be provided any assets, services or facilities to Konzern.
(iv) Konzern does not beneficially own, directly or
indirectly, any investment assets of any such current or former officer,
director, Stockholder or affiliate.
(k) No Broker. Neither the Stockholders nor Konzern has employed
or engaged any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement. Stockholders shall indemnify and hold the Issuer
harmless from and against any manner of loss, damage, liability or expense,
including reasonable fees and expenses of counsel, as a result of any fees or
commissions due to any finder or broker for compensation in connection with the
transactions contemplated by this Agreement as a result of the conduct by, or
agreements entered into by, Stockholders. This obligations of Stockholders
pursuant to this Section 3(k) shall survive the Closing.
(l) Reliance by the Issuer. The representations and warranties set
forth in this Section 3 do not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements contained
herein and therein, when taken together, not misleading.
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(m) Registration Rights. The Stockholders shall have the
registration rights with respect to the Shares as are set forth in Exhibit B to
this Agreement. The shares shall be subject to an 18-month lock-up, as provided
in said Exhibit B.
4. Conditions to the Obligation of the Issuer. The obligations of the
Issuer under this Agreement are subject to the satisfaction of the following
conditions unless waived by the Issuer:
(a) Representations and Warranties. On the Closing Date, the
representations and warranties of Stockholders shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as if made on such date, and Stockholders shall have performed all of its
obligations required to be performed by it pursuant to this Agreement at or
prior to the Closing Date, and the Issuer shall have received the certificate of
Stockholders to such effect and as to matters set forth in Section 4(b) of this
Agreement.
(b) No Material Adverse Change. No Material Adverse Change in the
business or financial condition of Konzern shall have occurred or be threatened
since the date of this Agreement, and no action, suit or proceedings shall be
threatened or pending before any court of governmental agency or authority or
regulatory body seeking to restraint, prohibition or the obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated by this Agreement or that, if adversely decided, has or may have a
material adverse effect on any of the assets, properties, business, prospects,
operations or financial condition of Konzern.
(c) Opinion of Counsel to Konzern. Stockholders shall have
delivered the opinion of its counsel, which shall be addressed to the Issuer and
to Xxxxxx Partners and any other investors in the Issuer who make their
investment contemporaneously with the Closing under this Agreement, to the
effect that:
(i) Konzern is a company organized and existing under the
laws of the Peoples Republic of China, and has the power to conduct is business
as presently conducts;
(ii) All company action necessary to enable Konzern and the
Stockholders to perform their obligations under this Agreement has been taken,
and this Agreement constitutes the valid and binding obligation of Konzern
enforceable in accordance with its terms;
(iii) The capital of Konzern is represented solely by the
Konzern Shares. All of the Konzern Shares are owned of record by Stockholders,
and the Konzern Shares are duly and validly authorized and issued, fully paid
and non-assessable;
(iv) All authorization from Chinese government authorities
which are necessary in order for Konzern and the Stockholders to consummate the
transactions contemplated by this Agreement, including the status of Konzern as
a wholly-owned foreign enterprise ("WOFE"), and, upon transfer of the Konzern
Shares pursuant to this Agreement, the Issuer will own all of the capital of
Konzern;
(v) To the knowledge of such counsel, Konzern has such
permits from government agencies as are necessary for it to conduct its business
as presently conducted.
(vi) Such other matters as the Issuer may reasonably request.
(d) Certified Documents. Konzern shall have delivered to the
Issuer:
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(i) The governing instruments of Konzern, certified by the
appropriate Chinese governmental authority.
(ii) Evidence from a government officer or agency dated as of
current date as to the good standing of Konzern.
(iii) The by-laws of Konzern, certified by the chief financial
officer of other officer authorized by the board.
(iv) An incumbency certificate confirming the positions and
signatures of the officers of Konzern.
5. Conditions to the Obligation of Stockholders. The obligations of
Stockholders under this Agreement are subject to the satisfaction of the
following conditions unless waived by Stockholders:
(a) Representations and Warranties. On the Closing Date, the
representations and warranties of the Issuer shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as if made on such date, and the Issuer shall have performed all of its
respective obligations required to be performed by it pursuant to this Agreement
at or prior to the Closing Date, and Stockholders shall have received the
certificate of the Issuer to such effect and as to matters set forth in Section
5(b) of this Agreement.
(b) No Material Adverse Change. No Material Adverse Change in the
business or financial condition of the Issuer shall have occurred or be
threatened since the date of this Agreement, and no action, suit or proceedings
shall be threatened or pending before any court of governmental agency or
authority or regulatory body seeking to restraint, prohibition or the obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated by this Agreement or that, if adversely decided,
has or may have a material adverse effect on any of the assets, properties,
business, prospects, operations or financial condition of the Issuer.
(c) Investment by Xxxxxx Partners. Xxxxxx Partners shall have
invested not less than US$3,000,000 in the Issuer pursuant to the Xxxxxx
Agreement, the net proceeds of which are to be used to provide Konzern with
working capital.
(d) Certified Documents. The Issuer shall have delivered to
Stockholders:
(i) The certificate of incorporation of the Issuer,
certified by the Secretary of State of Delaware.
(ii) A certificate issued by the Secretary of State of
Delaware dated as of current date as to the good standing of the Issuer in
Delaware.
(iii) The by-laws of the Issuer, certified by the Secretary of
the Issuer.
(iv) Resolutions of the Issuer's board of directors approving
this Agreement and the transactions contemplated by this Agreement.
(v) An incumbency certificate confirming the positions and
signatures of the officers of the Issuer.
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(e) SEC Filings. The Issuer shall be current with its filings
pursuant to the Exchange Act.
(f) Other Instruments. the Issuer shall have delivered such other
documents as counsel for Stockholders may reasonably request.
6. Termination.
(a) Basis For Termination. This Agreement may be terminated prior
to the Closing Date:
(i) By the written agreement of the parties.
(ii) By either party in the event that the other party shall
have breached its representations, warranties, covenants and agreements in any
material respect or failed to comply in any material respect with their
respective obligations pursuant to this Agreement in any material respect, and
such failure shall have continued for more than thirty (30) days after notice
thereof, in reasonable detail, shall have been given by the party seeking to
terminate this Agreement.
(iii) By either party if the conditions to such party's
obligation to close shall not have been satisfied or waived.
(iv) By either party if the Closing shall not have taken
place by March 15, 2006 other than as a result of a breach by the party seeking
to terminate this Agreement pursuant to this Section 6(a)(iv).
(b) Effect of Termination. In the event of a termination of this
Agreement pursuant to this Section 6, neither party shall have any obligation or
liability to the other, and each party shall bear its own expenses.
7. Miscellaneous.
(a) Entire Agreement. This Agreement, including the Exhibits and
the Schedule, which constitutes integral parts of this Agreement, constitutes
the entire agreement of the parties, superseding and terminating any and all
prior or contemporaneous oral and written agreements, understandings or letters
of intent between or among the parties with respect to the subject matter of
this Agreement. No part of this Agreement may be modified or amended, nor may
any right be waived, except by a written instrument which expressly refers to
this Agreement, states that it is a modification or amendment of this Agreement
and is signed by the parties to this Agreement, or, in the case of waiver, by
the party granting the waiver. No course of conduct or dealing or trade usage or
custom and no course of performance shall be relied on or referred to by any
party to contradict, explain or supplement any provision of this Agreement, it
being acknowledged by the parties to this Agreement that this Agreement is
intended to be, and is, the complete and exclusive statement of the agreement
with respect to its subject matter. Any waiver shall be limited to the express
terms thereof and shall not be construed as a waiver of any other provisions or
the same provisions at any other time or under any other circumstances.
(b) Severability. If any section, term or provision of this
Agreement shall to any extent be held or determined to be invalid or
unenforceable, the remaining sections, terms and provisions shall nevertheless
continue in full force and effect.
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(c) Notices. All notices provided for in this Agreement shall be
in writing signed by the party giving such notice, and delivered personally or
sent by overnight courier, mail or messenger against receipt thereof or sent by
registered or certified mail, return receipt requested, or by facsimile
transmission or similar means of communication if receipt is confirmed or if
transmission of such notice is confirmed by mail as provided in this Section
7(c). Notices shall be deemed to have been received on the date of personal
delivery or telecopy or attempted delivery. Notice shall be delivered to the
parties at the following addresses:
If to the Issuer: c/o Xxxxx X. Xxxxxxxx PC
Katsky Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212/716-3239
If to Konzern or the Stockholders: c/o The Stockholders Group
Guangzhou Konzern Medicine Co. Ltd.
Xxxx 000 Xxxxxxx Xxxxxxx Xx. 0
Xxxxx Xxxxxx Xin Chengsi
CHINA
Attention:
Facsimile:
With a copy to: Xxxxx X. Xxxxxxxx P.C.
Katsky Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212/716-3239
and
Xxxxx Xxx
00 Xxxxxxx Xxxxx; Xxxxx X-00
Xxxx Xxxxxxx Professional Center
Xxxxxxxxx Xxxxxxxx, XX 00000
Facsimile: 609/
Any party may, by like notice, change the address, person or telecopier number
to which notice shall be sent.
(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York applicable to agreements
executed and to be performed wholly within such State, without regard to any
principles of conflicts of law; provided, however, that the transfer of the
Konzern Shares to the Issuer shall be in compliance with the law of the Peoples
Republic of China. Each of the parties hereby irrevocably consents and agrees
that any legal or equitable action or proceeding arising under or in connection
with this Agreement shall be brought in the federal or state courts located in
the County of New York in the State of New York, by execution and delivery of
this Agreement, irrevocably submits to and accepts the jurisdiction of said
courts, (iii) waives any defense that such court is not a convenient forum, and
(iv) consent to any service of process made either (x) in the manner set forth
in Section 7(c) of this Agreement (other than by telecopier), or (y) any other
method of service permitted by law.
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(e) Survival of Representations and Warranties. The
representations and warranties shall terminate at, and shall not survive, the
Closing, except that the representations set forth in Sections 2(i) and 3(k)
shall survive the Closing.
(f) Waiver of Jury Trial. EACH PARTY HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN THE EVENT OF ANY SUIT, ACTION OR PROCEEDING TO
ENFORCE THIS AGREEMENT OR ANY OTHER ACTION OR PROCEEDING WHICH MAY ARISE OUT OF
OR IN ANY WAY BE CONNECTED WITH THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS.
(g) Parties to Pay Own Expenses. Each of the parties to this
Agreement shall be responsible and liable for its own expenses incurred in
connection with the preparation of this Agreement, the consummation of the
transactions contemplated by this Agreement and related expenses.
(h) Tax Consequences. Each party to this Agreement is relying on
his or its own tax advisors as to the tax consequences of this Agreement and the
transactions contemplated by this Agreement, and no party is making any
representations or warranties of any kind as to such tax consequences to any
other party.
(i) Successors. This Agreement shall be binding upon the parties
and their respective heirs, executors, administrators, legal representatives,
successors and assigns; provided, however, that Stockholders may not assign this
Agreement or any of its rights under this Agreement without the prior written
consent of the Issuer.
(j) Further Assurances. Each party to this Agreement agrees,
without cost or expense to any other party, to deliver or cause to be delivered
such other documents and instruments as may be reasonably requested by any other
party to this Agreement in order to carry out more fully the provisions of, and
to consummate the transaction contemplated by, this Agreement.
(k) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(l) No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties with the advice of
counsel to express their mutual intent, and no rules of strict construction will
be applied against any party.
(m) Headings. The headings in the Sections of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement.
(n) Exhibits; Schedules. One complete set of the Exhibits and
Schedules has been marked for identification and delivered by each of the
parties to the other on or before the execution and delivery of this Agreement.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
XXXXXXXXXX HOLDINGS III, INC.
By:____________________________________
Name: Xxxxx Xxx
Title: President
STOCKHOLDERS
---------------------------------------
Xxxxxxx Xxxx
---------------------------------------
Xxxxxx Xxx
---------------------------------------
Xxxxxx Xxx
Guangzhou Konzern Medicine Co. Ltd.
hereby consents to the foregoing
agreement.
GUANGZHOU KONZERN MEDICINE CO. LTD.
By:____________________________________
Xxxxxxx Xxxx, Chief Executive Officer
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Schedule A
Information Concerning Stockholders
Name and Address Konzern Shares Shares
---------------- -------------- ------
Xxxxxxx Xxxx 3,265,000
Xxxxxx Xxx 2,612,000
Xxxxxx Xxx 653,000
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Schedule B
DESCRIPTION NO. SHARES
Xxxxxxx Xxxx 3,265,000
Xxxxxx Xxx 2,612,000
Xxxxxx Xxx 653,000
Xxxxxx Partners (on conversion of pref'd) 3,120,000
Public Stockholders 100,000
Xxxxx Xxx 150,000
Xxx Xx 37,500
Qingsong Du 187,500
Xxxx Xxxx 125,000
Yaru Du 125,000
Yinshing To 125,000
Total Outstanding excl Xxxxxx conversion 7,380,000
Total Outstanding incl Xxxxxx conversion 10,500,000
Xxxxxx warrants A 3,694,738
Xxxxxx warrants B 3,694,738
Stock option/incentive plan (15% of o/s) 1,575,000
Total Reserved (excl. Xxxxxx conversion) 8,964,476
Total Reserved (incl. Xxxxxx conversion) 12,084,476
Total fully-diluted 19,464,476
XXXXXX INVESTORS SHARES
Xxxxxx Partners 2,640,000
Ray and Xxx Xxxxxx, JTWOS 160,000
Xxxxx Xxxxx 160,000
Xxxxxxx X Xxxxxx 160,000
Total 3,120,000
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