LETTER OF INTENT
THIS
BINDING LETTER OF INTENT (the “LOI”), is made this 6th day of June 2006, by GFR
PHARMACEUTICALS INC. (“GFRP”), a Nevada corporation, Xxxxxxx Xxxxxx (“Xxxxxx”),
the president and majority shareholder of GFRP, New Century Scientific
Investment Ltd . (“New Century”), a corporation formed according to the laws of
P. R. China, and
the
majority shareholder of New Century (referred to collectively as the "New
Century Shareholders").
This LOI
sets forth the terms and conditions upon which the parties will enter into
binding agreements.
TERMS
1. A
deposit
of $50,000 shall be made by New Century into the escrow account of Xxxxxx’x
lawyer at the same day when signing this LOI. A additional payment of $450,000
should be paid into the escrow account of Greentree Financial Group, Inc. by
New
Century at the Closing, which is expected to be no later than June 20, 2006
(the
"Closing"). All currency amounts stated in the LOI are in U.S. dollars. Any
escrow account shall be separate and individual from the other escrow and any
money in escrow account shall not mingle with any other money.
2. GFRP
and
New Century shall respectively have 10 days from the date the LOI is signed
for
due diligence on counterpart.
GFRP will provide New Century with a copy of all corporate books, records and
documents for review, as part of New Century's due diligence. This will
specifically include, but not by way of limitation, the Articles, Bylaws and
the
original Minute Books
and a
current shareholder list for the Company. If GFRP or New Century is not
satisfied with its due diligence review, this LOI, and all its terms and
conditions will become null and void and the deposit of $50,000 will be returned
to New Century. There is one exception to this cancellation clause: If New
Century’s GAAP audited assets are adjusted to less than $4 million before
Closing, Xxxxxx shall have the option to cancel this LOI and keep the $50,000
deposit as liquidated damages.
3. In
the
event that GFRP is not free from material liabilities by Closing, all deposits
and payments as well as any interests incurred hereafter made by New Century
should be refunded (GFRP should provide a comfort letter signed by independent
attorney that no legal claims or threatened litigation exist in GFRP)
4. GFRP’s
board of directors will appoint the nominee of New Century to the board of
directors of GFRP to fill the vacancy created by the resignation of one of
the
current board members of GFRP.
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5. GFRP
and
Xxxxxx confirm that GFRP 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, unless this LOI is cancelled. GFRP
will issue 40,000,000 new shares to New Century in connection with the
acquisition of a 90+% interest in New Century in accordance with the terms
and
conditions of a Plan of Exchange to be prepared by New Century and approved
by
GFRP (the “Plan of Exchange”).
6. 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 Xxxxxx represent there are no warrants outstanding.
7. Pursuant
to Clause 5, the issuance will give New Century’s majority shareholders' a
'controlling interest' in GFRP representing approximately 95% of the then issued
and outstanding shares. New Century's majority shareholders will maintain GFRP's
active trading status on the NASD’s Over-the-Counter Bulletin Board quotation
market.
8. Xxxxxx
shall be responsible to procure GFRP to restructure the equity of GFRP to
guarantee that New Century will have approximately 95% shares of GFRP on and
after the Closing.
9. GFRP
shall take all steps in connection with this LOI and the issuance of shares
thereunder which are necessary to effect and validly complete the transaction
contemplated in this LOI and / or Plan of Exchange and to comply in all material
respects with the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, as well as the rules and regulations
promulgated pursuant thereto, including but not limiting to the preparation
and
filing of the necessary United States Securities and Exchange Commission
filings, any required Form 8-K, all appropriate shareholder notifications and
change of actual control in connection with the merger and acquisition
contemplated in this LOI and / or Plan of Exchange. GFRP will pay all filing
and
compliance costs for fulfilling the obligation and / or duties herein before
the
Closing. New Century shall bear fees for its financial audits. New Century
shall
also prepare the Plan of Exchange for this transaction.
10. 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.
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11. GFRP
shall eliminate all known liability of GFRP as of the Closing. This shall
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. Xxxxxx shall indemnify New Century concerning
any liabilities of GFRP existing prior to the Closing, including those not
booked in the accounting records of GFRP, which may arise following the
acquisition for a period of three years after the Closing.
12. In
conjunction with this LOI, New Century, GFRP and Xxxxxx or its nominee and/or
third parties shall enter into three separate agreements. In the first
agreement, New Century shall acquire 200,000 common shares from Xxxxxx for
$325,000. Additionally, $175,000 shall be used to settle liabilities and
transaction expenses. Xxxxxx will retain 370,000 shares of GFRP as an
investment, of which 170,000 shall be locked up for three months after the
Closing and 200,000 shall be locked up for twelve months after Closing. As
consideration for Xxxxxx agreeing to the terms of this purchase and sale of
shares, GFRP agrees, for a period of eighteen months, not to rollback,
consolidate, or merge its shares in any way that would effectively reduce the
shareholdings of Xxxxxx.
13. 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 three wholly-owned subsidiaries for $1.00 in hand, GFR Pharma, Inc.,
GFR Health, Inc. and Nutritionals Direct, Inc(“three subsidiaries”).
14. In
the
third separate agreement, GFRP will also assign to Xxxxxx or his nominee the
debt owed to GFRP by the three subsidiaries. The Board of Directors will approve
after appropriate review (with Xxxxxx abstaining) the settlement of debt with
GFR Pharma Ltd. and will approve the acceptance of shares of the capital stock
of GFR Pharma Ltd., as full payment of said GFR Pharma Ltd. debt.
15. GFRP’s
board of directors will approve the terms of the vend out of its three
subsidiaries to a purchaser, to be determined by Xxxxxx and mutually agreed
by
New Century. It is agreed that a vend out of three subsidiaries and issuance
of
share of 95% of GFRP to New Century ‘s shareholder or its nominees are
conditions precedent for releasing any money in escrow account of Xxxxxx lawyer
and Greentree Financial Group, Inc.
16. The
three
separate agreements will be prepared by Greentree Financial Group, Inc, and
the
first draft will be delivered to the parties for review and comment by no later
than June 15, 2006, and approved and signed by the applicable parties by no
later than June 20, 2006 (the “Closing”).
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17. At
Closing, New Century will represent and warrant that there has been no material
changes in New Century’s financial position as set out in the due diligence
information and documents provided to GFRP except for the change of controlling
shareholder in compliance with the requirements of merger and acquisition set
up
in regulation and rules and law in P. R. China.
18. GFRP
and
Xxxxxx shall use their best efforts to complete an offering of up to $2 million
for New Century within a reasonable time after the Closing.
19. On
or
immediately after the Closing, Xxxxxx shall hand in Greentree Financial Group,
Inc the signed letter regarding his resignation to the positions of director
and
officer of GFRP.
20. Xxxxxx
shall retain the right to future use of the name GFR Pharmaceuticals Inc. if
and
only if the new management of GFRP changes the corporate name.
21. All
transactions shall be approved by the board of directors of both GFRP and New
Century. The Plan of Exchange shall be approved and signed by all parties by
no
later than June 20, 2006 unless extended in writing by both parties and subject
to GFRP and New Century's respective satisfaction with its due diligence.
Subject to the condition and terms in this LOI and Plan of Exchange, final
closing, including the filing of the Plan of Exchange, the acquisition of 90+%
of New Century by issuance of 40,000,000 shares of GFRP to New Century, vending
out of the three subsidiaries to Xxxxxx or his nominee, and the assignment
of
the debt to Xxxxxx or his nominee shall occur within 60 days from the signing
of
the Plan of Exchange. If the transactions set forth in this LOI are not
completed due to default of New Century, this LOI and all its terms and
conditions will become null and void and the non-refundable deposit of $50,000
will be released to Xxxxxx.
22. Controlling
law -this LOI shall be construed under the laws of Nevada.
23. This
LOI
has not
binding
force to all parties unless both parties otherwise have consensus.
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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
Xxxxxxx
Xxxxxx
(Individual)
/s/
Xxxxxxx Xxxxxx
Xxxxxxx
Xxxxxx
Majority
Shareholder
New
Century Scientific Investment Ltd.
(“New
Century ”)
/s/
Wang, Li Xx
Xxxx,
Li
An
President
Guo,
Li An
(individual)
/s/
Guo, Li An
Guo,
Li
An
Majority
Shareholder
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