LETTER OF INTENT
Exhibit
10.1
THIS
BINDING LETTER OF INTENT (the “LOI”), is made this 12th day of August 2005, by
GFR PHARMACEUTICALS INC. (“GFRP”), a Nevada corporation, Xxxxxxx Xxxxxx
(“Xxxxxx”), the president and majority shareholder of GFRP, and Harbin Yinhai
Technology Development Company LTD
(“YHT”),
a corporation formed according
to the laws of P.R.China. This LOI sets forth the terms and conditions upon
which the parties will enter into binding agreements.
TERMS
| 1. |
GFRP’s
board of directors will appoint the nominee of YHT to the board of
directors of GFRP to fill the vacancy created by the resignation of
one of
the current board members of GFRP.
|
| 2. |
GFRP’s
board of directors will approve the terms of a vend out of its two
subsidiaries to a purchaser, to be determined by
Xxxxxx.
|
| 3. |
GFRP
confirms that it currently has
1,079,940
outstanding shares of common stock in total, and promises that no new
shares of GFRP have been or will be issued to other parties
except
YHT, unless this LOI is cancelled. GFRP
will issue 50,000,000 new shares to YHT shareholders in connection
with
the acquisition of a 95% interest in YHT in accordance with the terms
and
conditions of a plan of exchange to be prepared by YHT and approved
by
GFRP (the “Plan of Exchange”).
|
GFRP
also
confirms that the Board of Directors has authorized and GFRP has established
the
2000 Incentive and Non-qualified Stock Option Plan. Under the plan GFRP is
authorized to issue up to 100,000 shares of GFRP's common stock with such
exercise price and vesting periods as the board of directors deems to be in
the
best interest of GFRP. As of June 30, 2005, no options have been granted. In
addition, no options will be issued prior to closing. Further, GFRP represents
there are no warrants outstanding.
| 4. |
The
above issuance will give
YHT shareholders, as a group (the “YHT Group”), a 'controlling interest'
in GFRP
representing approximately 98% of
the then issued and outstanding shares.
YHT
will maintain GFRP's active trading status on the NASD’s Over-the-Counter
Bulletin Board quotation market.
|
| 5. |
GFRP
will prepare and file the necessary United States Securities and Exchange
Commission filings, including any required Form 8-K. GFRP will make
all
appropriate shareholder notifications in connection with the acquisition
of YHT, including the change of control. YHT
will pay all filing and compliance costs including their financial
audits.
YHT will also prepare the Plan of Exchange for this
transaction.
|
Initials:____
____ ____
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| 6. |
If
GFRP is not satisfied with it due diligence review, this
LOI, and all its terms and conditions, and the Plan of Exchange, and
all
of its terms and conditions, will become null and void and the
non-refundable deposit of US$50,000 will be returned to
YHT.
|
| 7. |
At
Closing, YHT will represent and warrant that there has been no material
changes in YHT’s financial position as set out in the due diligence
information and documents provided to
GFRP.
|
| 8. |
If
holders of GFRP stock are entitled to dissenter’s rights in connection
with any action of GFRP required to be completed prior to the Closing
under General Corporation Law of the State of Nevada, and such dissenting
shareholders exercise their right of dissent, GFRP shall satisfy and
pay
such obligation to the dissenting shareholder immediately prior to,
as an
express condition to, the Closing.
|
| 9. |
GFRP
will eliminate all known liability of GFRP
as of the Closing.
This
will include, but is not limited to, any accounts payable, bank overdraft,
bank line, shareholder loans or accrued expenses, as well as any
liabilities shown on its last quarterly report filed with the United
States Securities and Exchange Commission prior to the Closing.
The
shareholders signing below will indemnify GFRP concerning
any liability of GFRP that existed prior to Closing and was not recorded
in the accounting records of GFRP that arise following the acquisition
for
a period of three years after the Closing.
|
| 10. |
GFRP
will be responsible for the equity structure to guarantee that the
YHT
Group will have approximately 98% of GFRP after the
Closing.
|
| 11. |
In
conjunction with this LOI, YHT, GFRP and certain GFRP shareholders
and/or
third parties shall enter into three separate agreements. In the first
agreement, YHT
will acquire 200,000 common shares from Xxxxxx
for $550,000. Xxxxxx
will retain 370,000 shares of GFRP as an investment. As consideration
for
Xxxxxx agreeing to the terms of this purchase and sale of shares, GFRP
agrees, for a period of nine months, not to rollback, consolidate,
or
merge its shares in any way that would effectively reduce the
shareholdings of Xxxxxx.
|
| 12. |
In
conjunction with and in the second agreement, separate from the share
purchase agreement for 200,000 shares, Xxxxxx or his nominee will acquire
a 100% interest in GFRP’s two wholly-owned subsidiaries, GFR Pharma, Inc.
and GFR Health, Inc. In the third separate agreement, GFRP will also
assign to Xxxxxx or his nominee the debt owed to GFRP by the subsidiaries.
As consideration for the shares in the subsidiaries and for the assignment
of debt Xxxxxx or his nominee will pay an aggregate $250,000 to GFRP
in
accordance with the terms and conditions to be approved and offered
by the
board of directors of GFRP.
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Initials:____
____ ____
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| 13. |
The
three separate agreements will be prepared by Greentree Financial Group,
Inc, and approved and signed by the applicable parties by no later
than
the Closing.
|
| 14. |
GFRP
and GFRP’s management will use their best efforts to complete an offering
of up to US$2 million for GFRP within a reasonable time after
Closing.
|
| 15. |
On
the signing of the Plan of Exchange, YHT will deliver a US$50,000
non-refundable deposit for the purchase price of the shares from Xxxxxx,
which will be deposited with Xxxxxx’x lawyer to be held in trust for the
benefit of Xxxxxx and subject to the terms of the
LOI.
|
| 16. |
All
deposits and payments are non-refundable so long as GFRP certifies
that
the liabilities of GFRP have been settled prior to the Closing.
(Certification should include written statements by GFRP’s independent
accountants). However, if GFRP fails to settle all known liabilities
prior
to the Closing, all deposits and payments made by YHT will be refunded.
All currency amounts are in U.S. dollars.
|
| 17. |
On
or immediately after the Closing, Xxxxxx will resign as director and
officer of GFRP.
|
| 18. |
GFRP
founding principals will retain the right to future use of the name
GFR
Pharmaceuticals Inc. if the new management of GFRP changes the corporate
name.
|
| 19. |
All
transactions will be approved by the board of directors of both GFRP
and
YHT. The Plan of Exchange will be approved and signed by all parties
by
August 18, 2005 unless extended in writing by both parties. Final closing,
including the filing of the Plan of Exchange, the acquisition of 95%
of
YHT by issuance of the 50 million shares of GFRP to the shareholders
of
YHT, vending out of the subsidiaries to Xxxxxx or his nominee, and
the
assignment of the debt to Xxxxxx or his nominee will occur within 45
days
from the signing of the Plan of Exchange or as soon as reasonably possible
after 45 days, but no more than 60 days after the signing of the Plan
of
Exchange (the “Closing”). If the transactions set out in this LOI are not
completed due to default of YHT, this LOI and all its terms and conditions
will become null and void and the non-refundable deposit of US$50,000
will
be released to Xxxxxx.
|
| 20. |
Due
diligence review - The
parties agree that they each will be provided any opportunity for a
due
diligence review period in accordance with the terms of the Plan of
Exchange.
|
| 21. |
Controlling
law - this LOI shall be construed under the laws of
Nevada.
|
| 22. |
This
LOI is binding and enforceable by all
parties.
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Initials:____
____ ____
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IN
WITNESS WHEREOF, the parties have executed this LOI on the date first above
written.
| GFR Pharmaceuticals Inc. (“GFRP”) | |||
| /s/ Xxxxxxx Xxxxxx | |||
|
Xxxxxxx Xxxxxx President, C.E.O., Director
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| Xxxxxxx Xxxxxx (Individual) | |||
| /s/ Xxxxxxx Xxxxxx | |||
|
Xxxxxxx Xxxxxx Majority Shareholder
|
|
Harbin
Yinhai Technology Development Company LTD
(“YHT”)
|
|||
| /s/ Xxxx Xxxx | |||
|
Xxxx Xxxx President
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