ESCROW AGREEMENT
THIS
ESCROW AGREEMENT dated June 20, 2006 (this "Agreement"), is entered into by
and
among GFR Pharmaceuticals Inc., a Nevada corporation (“GFRP”), Xxxxxxx Xxxxxx,
controlling shareholder of GFRP ("Xxxxxx"), New Century Scientific Investment
Ltd., a corporation formed according to the laws of P. R. China ("New Century"),
Guo, Li An, controlling shareholder of New Century and representative of the
selling shareholders of New Century (referred to collectively as "New Century"),
and Greentree Financial Group, Inc. (the "Escrow Agent").
Recitals
| A. |
GFRP,
Xxxxxx and New Century are planning to enter into a Plan of Exchange
on
June 20, 2006 (the "Plan of Exchange"), pursuant to which a 90+%
interest
in New Century will be acquired by GFRP in exchange for 40,000,000
new
common shares of GFRP to New Century. In addition, New Century and/or
the
New Century shareholders will pay into escrow an aggregate payment
of
$500,000 which shall be used towards the share purchases and the
settling
of liabilities and expenses. In addition, New Century will hold
approximately 95% of then outstanding shares of GFRP common stock.
New
Century and/or the New Century shareholders will be in control of
GFRP
which is publicly traded on the NASDAQ Over-the-Counter Bulletin
Board.
|
| B. |
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
New
Century shareholders, unless the Letter of Intent dated June 6, 2006,
among the parties (the "LOI"), the Plan of Exchange, this Agreement,
and
all the transactions contemplated by the LOI and the Plan of Exchange
(collectively, the "Transactions") are
cancelled.
|
GFRP
and
Xxxxxx also confirm 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 May 31, 2006, no options have been
granted. In addition, no options will be issued prior to the Closing. Further,
GFRP and the Selling Shareholder represent there are no warrants outstanding
and
no toxic pill convertible debentures.
| X. |
Xxxxxx
will deliver his 200,000 common shares of GFRP to the Escrow Agent
in
accordance with the terms of the
Transactions.
|
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| D. |
GFRP
will deliver the 40,000,000 new shares to be issued to the New Century
shareholders to the Escrow Agent in accordance with the terms of
the
Transactions.
|
E.
New
Century will make total deposits of $500,000 into the US account of the Escrow
Agent in accordance with the terms of the Transactions.
NOW,
THEREFORE, in consideration of the premises and mutual promises herein made,
the
parties do hereby agree as follows:
1.
Deposit
of GFRP Shares and aggregate total deposits of $500,000.
Upon
signing the LOI, New Century shall make an initial deposit of $50,000 into
the
account of the Escrow Agent, which will be immediately disbursed to the account
of Xxxxxx' lawyer pursuant to the terms set forth in the LOI (the “Deposit”). If
GFRP or New Century is not satisfied with its due diligence review, the
Transactions, and all the terms and conditions will become null and void and
the
Deposit will be returned to New Century. There are two exceptions to this
cancellation clause: (1) If New Century’s GAAP audited assets are adjusted to
less than $4 million at Closing, Xxxxxx shall have the option to cancel the
Transactions and keep the Deposit as liquidated damages. (2) Secondly, if the
Transactions are not completed due to default of New Century, the Transaction
and all the terms and conditions will become null and void and the Deposit
will
be released to Xxxxxx.
Concurrent
with the execution of the Transactions documents (the "Closing"), New Century
will make the final payment of $450,000 into the account of the Escrow Agent
(the "Funds"). The Closing shall occur on or before June 20, 2006. All payments
are for the benefit of GFRP, Xxxxxx and the Escrow Agent, and are
non-refundable. Meanwhile, Xxxxxx will deposit total of 200,000 common shares
of
GFRP from the Selling Shareholder and 40,000,000 new common shares of GFRP,
which are sold to New Century shareholders, into the account of Escrow Agent.
The total of number of shares deposited approximate 95% of GFRP's voting shares,
hereinafter, the "Share Deposits". Any income or dividends on the GFRP Shares
shall be promptly paid to New Century. All currency amounts are in U.S. dollars.
2. Duties
of the Escrow Agent.
The
Escrow Agent shall receive and disburse the Funds to Xxxxxx upon the completion
of the Transactions, according to the terms of this agreement and according
to
disbursement instructions provided by Xxxxxx.
The
conditions for releasing the Funds (the "Disbursement") are (1) the delivery
of
the 200,000 shares from Xxxxxx to the Escrow Agent, (2) the delivery of the
40,000,000 shares for the benefit of New Century shareholders to the Escrow
Agent, (3) the absence of material liabilities in GFRP as defined by Generally
Accepted Accounting Principles, and (4) the vend out of the three subsidiaries.
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The
Escrow Agent shall receive and hold the Share Deposits pursuant to the terms
of
this Agreement until the Disbursement, and then the Escrow Agent shall release
the whole Share Deposits to New Century shareholders upon the instructions
provided by New Century. Upon written notice from a party to this Agreement
to
release the Share Deposits in a manner other than indicated in this Agreement,
the Escrow Agent shall notify all other parties to this Agreement of the
existence and terms of said notice. If all of the parties are in agreement
with
a particular distribution that is proposed, the Escrow Agent shall make such
distribution. However, if the parties are not in agreement with the manner
of a
proposed distribution, and after six months of negotiating they are still not
in
agreement, the Escrow Agent shall deliver the Funds to New Century, and the
Share Deposits back to GFRP and Xxxxxx at which time all Transactions will
be
terminated and deemed null and void.
3.
Compensation
of Escrow Agent.
Escrow
Agent shall be compensated in an amount equal to $25,000, payable on the release
of the Funds to Xxxxxx. The escrow fee will be paid by Xxxxxx from the total
deposits.
4. Authority.
The
Escrow Agent shall not be responsible for the identity, authority or rights
of
any person, firm or corporation executing or delivering or purporting to execute
or deliver this Agreement or any document deposited hereunder or any endorsement
thereon or assignment thereof.
5. Reliance.
The
Escrow Agent may rely upon any instrument or writing believed by it to be
genuine and sufficient and properly presented and shall not be liable or
responsible for any action taken or omitted in reliance thereon.
6.
Acts
by the Escrow Agent. The
Escrow Agent shall not be liable or responsible for any act it may do or omit
to
do in the exercise of reasonable care. In the event any property held by the
Escrow Agent hereunder shall be attached, garnished or levied upon or fall
under
any order of any court or the delivery thereof shall be made or entered by
any
court affecting the Share Deposits or any part thereof or any acts of the Escrow
Agent, the Escrow Agent is hereby authorized in its exclusive discretion to
obey
and comply with all such writs, orders, judgments or decrees so entered or
issued, whether with or without jurisdiction, and if the Escrow Agent obeys
and
complies with any such writ, order, judgment or decree, it shall not be liable
to any of the parties hereto, their successors, heirs or personal
representatives or to any other person, firm or business entity by reason of
such compliance notwithstanding such writ, order, judgment or decree be
subsequently reversed, modified, annulled, set aside or vacated.
7.
Escrow
Agent Indemnification. The
parties hereto jointly and severally agree to indemnify and hold the Escrow
Agent harmless from any and all costs, expenses, claims, losses, liabilities
and
damages (including reasonable attorneys' fees) that may arise out of or in
connection with the Escrow Agent's acting as escrow agent hereunder except
where
the Escrow Agent has been guilty of gross negligence or willful
misconduct.
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8.
Resignation.
The
Escrow Agent may resign for any reason, upon 30 days' written notice to the
parties. Upon expiration of such 30-day notice period, the Escrow Agent may
deliver the Share Deposits and any remaining Funds to any successor escrow
agent
appointed jointly by the parties, or if no successor escrow agent has been
so
appointed, deliver the Share Deposits to GFRP and Xxxxxx and any remaining
Funds
to New Century, at which time all Transactions will be terminated and deemed
null and void. Upon either such delivery, the Escrow Agent shall be released
from any and all liability under this Escrow Agreement. A termination under
this
paragraph shall in no way discharge the provisions hereof affecting
reimbursement of expenses, indemnity and fees.
9. Default
Provision.
If New
Century fails to make the payments into the escrow account as required under
this agreement, GFRP and Xxxxxx shall have the right at its sole discretion
to
unwind the Transactions. Under such default, Xxxxxx shall still be entitled
to
the Deposit made into escrow under this agreement.
IN
WITNESS WHEREOF, the parties have signed this document intending to be bound
by
its terms as of the day first written above.
GFR
PHARMACEUTICALS, INC. ("GFRP")
XXXXXXX
XXXXXX
By: /s/
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx, Individually)
Title:
President and Chief Executive Officer Majority
Shareholder
/
Selling Shareholder
NEW
CENTURY SCIENTIFIC INVESTMENT LTD. ("NEW CENTURY")
By:
/s/ Wang, Li An
Name:
Wang, Li An
Title:
Authorized Representative
GUO,
LI
AN
/s/
Guo, Li An
(Individually)
Majority
Shareholder
GREENTREE
FINANCIAL GROUP, INC.
By: /s/
R. Xxxxx Xxxxxxx
Name:
R.
Xxxxx Xxxxxxx
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