ASSET PURCHASE AGREEMENT
ASSET
PURCHASE AGREEMENT dated as of February 28, 2007 (this
"Agreement") by and among Harbin Renhuang Pharmaceuticals Co,
Ltd., (the "Buyer") a corporation incorporated in the Peoples
Republic of China, “PRC”, and Zhongfa Industrial
Group Yerui Pharmaceutical Co., Ltd., (the
“Seller’) a corporation incorporated in the
Peoples Republic of China, “PRC (the "Seller") (Buyer
and Seller are each hereinafter individually referred to as a
"Party" and collectively as the "Parties").
W
I T N E S S E T H:
WHEREAS,
the Seller is engaged in the business of extracting, producing
and packaging nutraceutical and related products in and under
the name of Qingyang Extracting Factory, located at Central
Plaza, Changjiang Road, Yanshou Town, Heilongjiang Province,
150090, P. R. China, (the "Business");
WHEREAS,
Mr. Cuilian Zhu ("Zhu") is the sole shareholder of the Seller
and the Seller is wholly-owned and controlled by
Zhu;
WHEREAS,
upon the terms and subject to the conditions set forth in this
Agreement, the Buyer desires to purchase from the Seller and
the Seller desires to sell to the Buyer, the Transferred
Assets (as hereinafter defined) of the Seller comprising the
Business, as more particularly described herein, in
consideration for the payments from the Buyer as set forth
herein;
WHEREAS,
the Buyer does not intend to assume any liabilities of the
Seller of any nature whatsoever (other than as specifically
set forth herein), whether related to the Business, the
Transferred Assets or otherwise; and
WHEREAS,
to induce the Buyer to proceed with the transactions described
in this Agreement, Seller and Zhu are prepared to make certain
representations, warranties and covenants to Buyer, and to
provide certain rights of indemnification to Buyer;
and
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and for other good and valuable
consideration the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound hereby, the
Parties hereto agree as follows:
ARTICLE
I.
PURCHASE
AND SALE OF TRANSFERRED ASSETS
AND
ASSUMPTION OF LIABILITIES
Section
1.1. Purchase and Sale of Transferred Assets. Upon the terms
and subject to the conditions of this Agreement, at the
Closing the Seller shall sell, transfer, convey, assign and
deliver free and clear of Encumbrances to Buyer, and Buyer
shall purchase, acquire and accept from Seller on the Closing
Date (as defined herein), all of the Seller's right, title and
interest in and to all of the assets, properties, contracts
and rights, whether tangible or intangible, as specified
below, whether accrued, contingent or otherwise, and wherever
located, that are used or held for use in connection with the
Business, as the same may exist on the Closing Date (as
defined herein) (collectively, the "Transferred
Assets"):
(a)
all inventories, consisting of raw materials, work in process
and finished goods, supplies and similar tangible assets of
the Seller related to the Business;
(b)
all right, title and interest of the Seller in and to the
customer purchase orders of Seller relating to the Business
entered into or issued prior to the Closing Date;
(c)
all notes and trade and other accounts receivable arising from
goods shipped by Seller on and after the Closing
Date;
(d)
the corporate name of the Seller and all names under which the
Seller is doing business or has conducted
business;
(e)
all patents, trade secrets, trademarks, inventions, processes,
procedures, research records, market surveys, copyrights,
service marks, trade names and know-how and other intellectual
property relating to the Business ("Intellectual Property"),
wherever located, of the Seller and all registrations and
applications for registrations of any of the foregoing, and
all claims against third parties for infringement of the
Intellectual Property rights;
(f)
the unused brochures, literature, advertising, catalogues,
photographs, display materials, media materials, packaging
materials and other similar items which have been produced by
or for the Seller;
(g)
the equipment used by Seller in the Business;
(h)
all customer lists and customer records in any form (and all
software related to any such customer records, to the extent
transferable), whether of past or present customers or
potential future customers, of the Business;
(i)
such manufacturers' guarantees and warranties, if any,
relating to the Business as may be in force at the Closing
Date in favor of the Seller and the benefit of any claims
against such manufacturers relating to the Business (including
without limitation any claim for breach of the manufacturers'
guarantees and warranties);
(j)
all goodwill of the Seller in the Business
("Goodwill");
(k)
all books, records, manuals, standard operating procedures,
correspondence, customer relation information and any other
confidential or proprietary information pertaining to the
Business; and
(l)
all certifications, franchises, approvals, permits, licenses,
orders, registrations, certificates, variances and other
similar permits or rights, if any, obtained from any
Governmental Entity or professional or trade organization
utilized in operating the Business and all pending
applications therefore.
Section
1.2. Assumption of Liabilities; Excluded
Liabilities.
(a)
Subject to the terms and conditions of this Agreement, the
Buyer agrees to assume and pay the Promissory Note with the
Agriculture Bank of China, Loan No. 230131111 in the principal
amount of RMB 1,090,000 and accrued interest in the amount of
approximately RMB 230,000 on the Closing Date, hereinafter
referred to as the Assumed Liabilities.
(b)
It is expressly agreed and understood that Buyer shall not
assume or be bound by any liabilities of the Seller, Zhu or
the Business of any kind or nature, known, unknown, accrued,
absolute, contingent, recorded or unrecorded or otherwise,
whether now existing or hereafter arising (the “Excluded
Liabilities") other than the assumption of the bank loan as
described in Section 1.2(a), the (the “Assumed
Liabilities”). Without limitation of the foregoing,
Buyer is not assuming any other liabilities or obligations
that are not Assumed Liabilities. All responsibility with
respect to any other liabilities, hereinafter referred to as
Excluded Liabilities shall remain with the Seller and Zhu. The
assumption of the Assumed Liabilities by Buyer hereunder shall
not enlarge any rights of third parties under any arrangements
or understanding with Buyer, Seller or Zhu or any of their
respective affiliates or subsidiaries, as
applicable.
c)
Except for the Assumed Liabilities, the Buyer shall not assume
or be bound by any obligations or liabilities of Seller, Zhu,
or any Affiliate of Seller or Zhu of any kind or nature,
known, unknown, accrued, absolute, contingent or otherwise,
whether now existing or hereafter arising.
d)
Seller shall be solely (as between Seller and the Buyer)
responsible for and pay any and all debts, losses, damages,
obligations, liens, assessments, judgments, fines, disposal
and other costs and expenses, liabilities and claims,
including, without limitation, interest, penalties and fees of
counsel and experts, as the same are incurred, of every kind
or nature whatsoever (all the foregoing being a "Claim" or the
"Claims"), made by or owed to any person to the extent any of
the foregoing relates to (i) the assets of the Seller not
transferred hereunder or (ii) the operations and assets of the
Business arising in connection with or on the basis of events,
acts, omissions, conditions, or any other state of facts
occurring or existing prior to or on the Closing
Date.
(e)
Buyer shall be solely (as between the Buyer and Seller)
responsible for and pay any and all Claims made by or owed to
any Person to the extent they relate to (i) the Assumed
Liabilities or (ii) the operations and assets (including the
Assets) of the Buyer's business after the Closing Date, in
each case, to the extent they arise in connection with or on
the basis of events, acts, omissions, conditions or any other
state of facts occurring or existing solely after the Closing
Date.
Section
1.3. Purchase Price. Subject to the other provisions of this
Agreement, the purchase price for the Transferred Assets shall
be payable as set forth below:
(a)
On the Closing Date, Buyer shall make a cash payment to Seller
of RMB 2,415,000;
(b)
On the Closing Date, Buyer shall assume Loan with the
Agricultural Bank of China, Loan No. 230131111 with principal
RMB 1,090,000 and approximately RMB 230,000 in accrued
interest as of the Closing
Date.
(c)
On the Closing Date, Seller shall pay any and all municipal,
county, state and federal sales and documentary transfer
taxes, impositions, liens, leases, assessments and similar
charges if any, in connection with the transaction
contemplated by this Agreement.
Section
1.4. Closing; Closing Date. Unless this Agreement shall have
been terminated and the transactions shall have been
abandoned, and subject to the fulfillment or waiver of the
conditions set forth in Articles IV and V of this Agreement,
the closing of the purchase and sale provided for in this
Agreement (herein called the "Closing") shall be held at the
offices of Renhuang No.
281, Taiping Road, Taiping District, Ha rbin,
Heilongjiang Province, 150050, P. R. China, on the date
hereof, or a date which is expected to be on or within five
(5) business days of the execution of this Agreement, or such
other location, date and time as to which the parties may
agree (such date and time being referred to herein as the
"Closing Date").
Section
1.5. Items to be delivered at the Closing by Seller. At the
Closing, Seller shall deliver or cause to be delivered to the
Buyer:
(a)
All such other instruments of assignment, transfer or
conveyance as, in the reasonable opinion of Buyer and its
counsel, shall be necessary to vest in Buyer, good, valid and
marketable title to the Transferred Assets, subject to no
Encumbrances and to put Buyer in actual possession or control
of the Transferred Assets.
(b)
A payoff letter from Agricultural bank of China and any other
documentation relating to the release of all security
interests as necessary.
(c)
Acceptance documents from the Agriculture Bank of China that
loan No. 230131111 has been transferred to the Buyer including
a Release Letter that the Seller has been released from its
loan obligation related to the same loan.
Section
1.6. Items to be Delivered at the Closing by Buyer. At the
Closing, Buyer shall deliver:
(a)
To the Seller, a copy of the resolutions of Buyer, certified
by its authorized officer, authorizing the execution, delivery
and performance of this Agreement and all the transactions
contemplated hereby.
(b)
The cash payment required by Section 1.3(a)
ARTICLE
II.
REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
hereby represents and warrants to and for the benefit of the
Buyer, as of the date hereof, as follows:
Section
2.1. Organization and Qualifications. Seller is a corporation
duly formed, validly existing and in good standing under the
laws of the Peoples Republic of China with all requisite
corporate or other power and authority to own, operate or
lease its Transferred Assets and to carry on its business as
currently conducted. Seller is duly qualified or licensed to
conduct business as a foreign corporation and is in good
standing in each jurisdiction where the nature of its business
or the ownership, operation or leasing of its properties
requires such qualification or licensing. The copies of the
certificate of incorporation and bylaws of the Seller, as
heretofore made available to Buyer, are correct and complete
in all respects.
Section
2.2. Authority; Binding Obligation. Seller has the requisite
authority and power to enter into, execute and deliver this
Agreement and each agreement, certificate document and
instrument to be executed and delivered by Seller pursuant to
this Agreement and to perform its respective obligations
hereunder. The execution, delivery and performance by Seller
of this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary
corporate action of Seller. This Agreement has been duly
executed and delivered by the Seller and constitutes a valid
and binding obligation of Seller enforceable in accordance
with its terms hereof and each of the Seller Documents
constitutes, or when executed and delivered will constitute,
valid and binding obligations of Seller enforceable in
accordance with their terms.
Section
2.3. No Conflict; Required Consents. The execution, delivery
and performance by Seller of this Agreement and the Seller
Documents, the fulfillment of and compliance with the terms
and provisions hereof and thereof and the consummation by the
Seller of the transactions contemplated hereby and thereby, do
not and will not conflict with or result in any violation by
the Seller, under any provisions of or result in acceleration,
termination, cancellation or modification of, or constitute a
default under: (i) the certificate or articles of
incorporation, bylaws or similar governing documents of the
Seller; (ii) any material note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession,
contract, lease, agreement, or other material instrument,
obligation or agreement of any kind relating to the Business
to which the Seller is a party or by which Seller, or any of
the Transferred Assets, may be bound or affected; (iii) any
Requirements of Law; or (vi) any Governmental Entity. Nor
shall such execution, delivery or performance result in the
creation or imposition of any Encumbrance of any nature
whatsoever upon the Business or Transferred Assets or require
any filing with, or permit, authorization, consent or approval
of, a Governmental Entity or other Person.
Section
2.4. Compliance.
(a)
With regards to the Business and the Transferred Assets,
neither Seller nor any of its respective employees or agents
has in the last three years been given notice of, or been
charged with, any material violation of, any law, order,
regulation, ordinance or judgment of any Governmental Entity,
including laws relating to wages, hours, safety and health,
equal employment opportunity, withholding, unemployment
compensation, workers compensation and employee privacy, nor,
to the best of Seller's knowledge, is Seller in violation of
same.
(b)
Seller has all permits, licenses and franchises, if applicable
and material, from Governmental entities necessary to conduct
the Business as currently conducted, including all business,
telecommunication and other permits, if any, from Governmental
Entities and is in full compliance with the terms thereof. No
material violations have been reported in respect of such
permits, licenses and franchises, nor, to the best of Seller's
knowledge do any exist.
Section
2.5. No Subsidiaries. Seller is wholly owned by its sole
shareholder, Zhu. The Business is wholly owned by Seller.
Other than the Business subject to this Agreement, neither the
Seller nor Zhu owns, of record or beneficially, or controls,
directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in
any corporation, association or business entity that is
engaged in the Business or that owns any of the Transferred
Assets of the Business, nor is the Seller nor Zhu, directly or
indirectly, a participant in any joint venture, partnership or
other non-corporate entity that is engaged in the Business or
that owns any of the Transferred Assets of the
Business.
Section
2.6. Absence of Liabilities. Seller, has no material
Indebtedness or Liabilities of any nature, whether accrued,
absolute, contingent or otherwise, whether due or to become
due and whether or not the amount thereof is readily
ascertainable, that are not reflected as a Liability in the
Financial Statements except for Liabilities incurred by the
Seller in the ordinary course of conducting the Business
consistent with past practices which are not otherwise
prohibited by, in violation of or which will result in a
breach of the representations, warranties and covenants of the
Seller contained in this Agreement.
Section
2.7. Title to Transferred Assets and Condition of Inventory.
The Seller has good and valid title to all of the Transferred
Assets, free and clear of any lien, charge or other
encumbrance. The Transferred Assets are in good condition and
have no material defects which would interfere with, or
materially detract from the value or impair the use of the
Transferred Assets subject thereto and, except for certain
equipment, are sufficient to conduct, the Business as
presently conducted or to be conducted by the Buyer after the
date of this Agreement assuming the Business is operated in a
manner consistent with past practices. To the best Knowledge
of Seller, all inventory of the Seller relating to the
Business, including but not limited to raw materials, consists
of a quality and quantity usable in the ordinary course of
business.
Section
2.8. Products Liability. Neither the Seller nor any insurance
company or other third party acting on their behalf has, in
the preceding five years, paid any amount or damages to any
third party for deaths of or injuries to persons or damage to
property, or for breach of warranty arising out of any alleged
defect in quality, materials, workmanship or design of any of
the products sold or services performed by the Seller relating
to the Business. There is no material claim nor has there been
a material claim against Seller concerning any product
manufactured, shipped, sold or delivered by Seller which is
pending or, to the knowledge of Seller, threatened, which
alleges the occurrence of any bodily injury or other adverse
health condition resulting from either an alleged failure to
warn as to the manufacture or materials of any such product,
or an alleged breach of implied warranties or representations
made with respect to any such product.
Section
2.9. Environmental Laws. The Seller is in compliance with all
Environmental Laws known by the Seller to be applicable to the
Real Property owned or leased by the Seller, except where the
failure to comply would not have a material adverse effect on
the Business or the transactions contemplated hereby or result
in liability to Buyer (a "Material Adverse Effect"). The
Seller has no liability under any Environmental Law which,
individually or in the aggregate, would have a Material
Adverse Effect.
Section
2.10. Financial Statements. Seller has delivered to the Buyer
a copy of the following financial statements:
(a)
the balance sheet and related statements of operations of the
Business for the fiscal years ending on December 31,2005 and
December 31, 2004 audited pursuant to Chinese GAAP;
and
(b)
the interim unaudited balance sheet as of June 30, 2006 and
the related statements of operations of the Business for the
period then ended (the "Interim Financials").
(c)
Except for the transactions contemplated by this Agreement,
since June 30, 2006, the Seller has conducted the Business
only in the ordinary course of business consistent with past
practice and there has not been any of the following, but
solely insofar as they relate to the Business or the
Transferred Assets: (i) any material damage, destruction or
loss, whether or not covered by insurance; (ii) any mortgage
or pledge of any of the Business' property or Transferred
Assets, tangible or intangible (except in connection with
Seller's financings); (iii) any sale, transfer, lease or
disposal of material Transferred Assets or any Intellectual
Property or incurrence, assumption, cancellation or compromise
of any Indebtedness or claim (other than accounts receivable
compromised in the ordinary course of business consistent with
its past practice), or waiver or release of any right; (iv)
receipt of any notice or threat of termination of any material
purchase order; (v) cancelled or compromised any debt or
claim, or waived or released any right of material value; (vi)
any material change in any method of accounting or auditing
practice; (vii) entered into any transaction other than in the
ordinary course of business; (viii) made any acquisition of
any material assets or become involved in any other material
transaction, other than for fair value in the ordinary course
of business; or (ix) agreed to do any of the foregoing other
than pursuant hereto.
Section
2.11. Taxes.
(a)
All Chinese, and applicable foreign Tax Returns, if any, of
the Seller relating to the Business or the Transferred Assets
for all periods which end prior to or which include the
Closing Date that were required to be filed on or before the
Closing Date have been filed on a timely basis in accordance
with the Applicable Law of each applicable Governmental
Entity, and all such Tax Returns are true, correct and
complete. The Seller shall timely file or cause to be filed
all Tax Returns of the Seller relating to the Business or the
Transferred Assets including Tax Returns relating to the sale
contemplated by this Agreement, that relate to periods
including the Closing Date but that are required to be filed
after the Closing Date, and all such Tax Returns shall, be
true, correct and complete when filed.
(b)
Seller has paid all Taxes relating to the Business or the
Transferred Assets that have become due for all periods which
end prior to the Closing Date, including all Taxes reflected
on the Tax Returns referred to in this Section 2.11, or set
forth in any written assessment, proposed assessment or
notice, either formal or informal, received by the Seller that
are being contested in good faith and as to which adequate
r
|
