Exhibit 10.16
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "Agreement") is dated June 11, 2004
AMONG:
DRAGON PHARMACEUTICAL INC., a company incorporated under the laws
of the State of Florida, with an office at 1900 - 0000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
("Dragon")
AND:
ORIENTAL WAVE HOLDING LTD., a company incorporated under the laws
of the British Virgin Islands, with an office at Beaufort House,
P.O. Box 438, Roadtown, Tortola, British Virgin Islands
("Oriental")
AND:
YAN-XXX XXX, x/x Xxxxxx Xxxxxxx Pharmaceutical Co. Ltd., Datong
Economic and Technology Development Zone, Shanxi, China 037300
ZHAN-XXX XXXX, c/o Shanxi Weiqida Pharmaceutical Co. Ltd., Datong
Economic and Technology Development Zone, Shanxi, China 037300
XUE-XXX XXX, x/x Xxxxxxxx Xxxxxxxxxx, 0/X, Xxxxx X, Xxxxxxx
Center, Xx. 0, Xxxxxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxxx,
Xxxxx 100022
(collectively, the "Vendors" and each, a "Vendor")
WHEREAS:
(A) Oriental is a private company, a subsidiary of which is engaged in the
pharmaceutical business;
(B) The Vendors are the registered and beneficial owners of all the issued and
outstanding shares (the "Vendors' Shares") in the capital of Oriental as
follows:
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Shareholder Shares
Yan-Xxx Xxx 35,000
Zhan-Xxx Xxxx 10,000
Xue-Xxx Xxx 5,000
(C) Under a letter of intent dated as of March 17, 2004 among Dragon, Oriental
and the Vendors, Dragon agreed to purchase all of the Vendors' Shares in
consideration for the issuance of common shares of Dragon, with the result that
Oriental will become a wholly-owned subsidiary of Dragon and the Vendors will
become shareholders of Dragon;
(D) The Vendors wish to sell, and Dragon wishes to purchase, the Vendor's
Shares.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
PART 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement:
"Additional Dragon Closing Shares" has the meaning ascribed to it in Section
2.3;
"Business Day" means a day other than Saturday, Sunday or any day that is a
legal holiday in British Columbia;
"Closing" means the completion of the transactions contemplated hereby in
accordance with the terms hereof;
"Closing Date" has the meaning ascribed to it in Section 6.1;
"Common Shares" means common shares in the capital of Dragon;
"Consents" means the consents, waivers and approvals of third parties reasonably
required by any party to complete their obligations under this Agreement;
"Damages" means all losses, judgments, amounts paid in settlement of actions or
claims, liabilities (whether accrued, actual, contingent or otherwise), costs,
deficiencies, damages, expenses (including but not limited to legal fees and
disbursements on a solicitor and his own client basis), demands or injury
suffered by a party;
"Dragon Closing Shares" has the meaning assigned in Section 2.2;
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"Dragon Convertible Securities" are those convertible securities of Dragon set
out in Schedule B;
"Dragon Shares" means the Dragon Closing Shares and the Additional Dragon
Closing Shares;
"Escrow Agreement" has the meaning set out in Section 2.6;
"GAAP" means generally accepted accounting principles applicable in the United
States which are:
(i) consistent with the principles recommended by the Financial Accounting
Standards Board and the U.S. Securities and Exchange Commission, and
(ii) applied on a basis consistent with prior periods,
such that a certified public accountant would, insofar as the use of accounting
principles is pertinent, be in a position to deliver an opinion as to financial
statements in which such principles have been properly applied;
"Person" means an individual, corporation, body corporate, partnership, joint
venture, society, association, trust or unincorporated organization or any
trustee, executor, administrator or other legal representative;
"Regulatory Approvals" means all prior approvals, authorizations, filings and
consents, including the Consents, of any applicable Regulatory Authorities (as
defined in Schedule A) required for the completion of the share purchase
contemplated in this Agreement, including the approval of the Toronto Stock
Exchange and Dragon's registration or proxy statement being declared effective
by the U.S. Securities and Exchange Commission; and
"Vendors' Shares" means all shares of Oriental beneficially owned by the Vendors
including all shares acquired after the date of this Agreement.
Interpretation
1.2 In this Agreement, except as otherwise expressly provided,
(a) "Agreement" means this Agreement, including the preamble and the
Schedules hereto, as it may from time to time be supplemented or amended
and in effect;
(b) a reference to a Part is to a Part of this Agreement, and the word
Section followed by a number or some combination of numbers and letters
refers to this section, paragraph, subparagraph, clause or subclause of
this Agreement so designated;
(c) "herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Section or
other subdivision or Schedule;
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(d) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof;
(e) the singular of any term includes the plural, and vice versa, the use
of any term is equally applicable to any gender and, where applicable, a
body corporate, the word "or" is not exclusive and the word "including" is
not limiting (whether or not non-limiting language, such as "without
limitation" or "but not limited to" or words of similar import, is used
with reference thereto);
(f) any accounting term not otherwise defined has the meaning assigned to
it in accordance with U.S. GAAP; (g) except as herein otherwise
specifically set forth, a reference to a statute includes and is a
reference to that statute and to the regulations made pursuant thereto,
with all amendments made thereto and in force from time to time, and to any
statute or regulations that may be passed which has the effect of
supplementing or superseding that statute or regulation;
(h) where any representation or warranty is made "to the knowledge of" any
Person, it means such Person is not aware of any state of facts or
circumstance which would make the representation or warranty untrue;
(i) except as otherwise provided, any dollar amount referred to in this
Agreement is in United States funds; and
(j) any other term defined within the text of this Agreement has the
meaning so ascribed to it.
Schedules
1.3 The following are the Schedules to this Agreement:
Schedule A - Representations and Warranties
Schedule B - Release of Additional Dragon Closing Shares
Schedule C - Escrow Agreement
Schedule D - Opinions Required from Counsel for Vendors
Schedule E - Opinions Required from Counsel for Dragon
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PART 2
PURCHASE AND SALE
Purchase and Sale
2.1 On the basis of the warranties, representations and covenants of the
Vendors and Oriental herein set forth and subject to the fulfilment of any
condition herein provided that has not been waived by the party entitled to the
benefit thereof, on the Closing Date, Dragon will purchase from each of the
Vendors, and each of the Vendors will sell to Dragon, that number of Vendors'
Shares set forth opposite his or her name in Recital (B) on the terms and
conditions herein set forth.
Issuance of Dragon Closing Shares
2.2 On the Closing Date, and subject to Section 2.3, Dragon will pay for the
Vendors' Shares by the issuance to the Vendors of that number of Common Shares
(the "Dragon Closing Shares") which is equal to 68.35% of the issued Common
Shares as at the time of Closing and after giving effect to the issuance of the
Dragon Closing Shares determined according to the following formula:
Number of Common Shares outstanding at Closing / 0.3165 x 0.6835
No fractional Dragon Closing Shares will be issued. Fractional shares otherwise
issuable will be rounded down.
Additional Dragon Closing Shares
2.3 In addition to the Common Shares issued under Section 2.2, on the Closing
Date, Dragon will issue to the Vendors as additional consideration for the
Vendors' Shares that number of Common Shares (the "Additional Dragon Closing
Shares") which is equal to 68.35% of the Common Shares issuable as at the time
of Closing on the exercise of the Dragon Convertible Securities and after giving
effect to the issuance of the Additional Dragon Closing Shares, determined
according to the following formula:
Number of Common Shares issuable / 0.3165 x 0.6835
at Closing on exercise of the Dragon
Convertible Securities
No fractional Additional Dragon Closing Shares will be issued. Fractional shares
otherwise issuable will be rounded down.
Deemed Issue Price
2.4 The Dragon Closing Shares and the Additional Dragon Closing Shares will be
issued at a deemed price per share equal to $1.00.
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Allocation of Dragon Closing Shares
2.5 The Dragon Shares will be allocated among the Vendors, pro rata to their
ownership of Vendors' Shares, as follows:
Vendor Percentage of Shares
Yan-Xxx Xxx 70%
Zhan-Xxx Xxxx 20%
Xue-Xxx Xxx 10%
Escrow of Common Shares
2.6 At the Closing, 50% of the Dragon Closing Shares and all of the Additional
Dragon Closing Shares will be deposited into escrow under an escrow agreement
(the "Escrow Agreement"), the form of which is attached as Schedule C.
2.7 Subject to any claim made under Part 8, the Dragon Closing Shares deposited
under the Escrow Agreement will be released such that after one year only 30% of
the Dragon Closing Shares remain in escrow and after two years no Dragon Closing
Shares remain in escrow.
2.8 As provided for in Schedule B, the Additional Dragon Closing Shares will be
released from deposit under the Escrow Agreement as Dragon Convertible
Securities (a) are exercised, in which case they will be released to the Vendors
for no additional consideration, or (b) expire unexercised or are otherwise
cancelled, in which case they will be released to Dragon for cancellation for no
consideration.
PART 3
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of Oriental and the Vendors
3.1 In order to induce Dragon to enter into and consummate the transactions
contemplated by this Agreement, Oriental and each Vendor represents and warrants
to Dragon that the representations and warranties contained in Parts 2 and 3 of
Schedule A are true, accurate and complete as at the date of this Agreement.
Material Change in Oriental
3.2 From the date of this Agreement until the Closing, Oriental and each of the
Vendors will promptly notify Dragon of any material change (actual, anticipated,
contemplated or threatened, financial or otherwise) in the business, affairs,
operations, assets, liabilities (contingent or otherwise) or capital of Oriental
and its subsidiaries, taken as a whole.
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Representations and Warranties of Dragon
3.3 In order to induce Oriental and the Vendors to enter into and consummate
the transactions contemplated by this Agreement, Dragon represents and warrants
to Oriental and the Vendors that the representations and warranties of Dragon
contained in Part 4 of Schedule A are true, accurate and complete as at the date
of this Agreement.
Material Change in Dragon
3.4 From the date of this Agreement until the Closing, Dragon will promptly
notify the Vendors of any material change (actual, anticipated, contemplated or
threatened, financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise) or capital of Dragon and its
subsidiaries, taken as a whole.
PART 4
CONDITIONS
Conditions For the Benefit of the Vendors
4.1 The obligation of the Vendors to complete the transactions contemplated in
this Agreement at the Closing is subject to the fulfilment, to the sole
satisfaction of the Vendors acting reasonably, of each of the following
conditions on or before the Closing Date:
(a) the representations and warranties of Dragon in this Agreement and in
any agreement, certificate or document delivered pursuant to the provisions
of this Agreement or in connection with the transactions contemplated in
this Agreement, will be true and correct in all material respects, as of
the date hereof and as of the Closing Date;
(b) all covenants and agreements contained in this Agreement to be
performed or complied with by Dragon on or before the Closing Date will
have been performed or complied with in all material respects;
(c) the Vendors having received all of the items listed in Section 6.3; and
(d) Dragon acknowledging the satisfaction of, or waiving the satisfaction
of, the conditions set out in Section 4.3.
Waiver of Conditions by the Vendors
4.2 The conditions set forth in Section 4.1 are for the exclusive benefit of
the Vendors and may be waived, in whole or in part, by the Vendors on or before
the Closing Date.
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Conditions for the Benefit of Dragon
4.3 The obligation of Dragon to complete the transactions contemplated in this
Agreement at the Closing is subject to the fulfilment, to the sole satisfaction
of Dragon acting reasonably, of each of the following conditions on or before
the Closing Date:
(a) the representations and warranties of Oriental and each Vendor in this
Agreement and in any agreement, certificate or document delivered pursuant
to the provisions of this Agreement or in connection with the transactions
contemplated in this Agreement, will be true and correct in all material
respects, as of the date hereof and as of the Closing Date;
(b) all covenants and agreements contained in this Agreement to be
performed or complied with by Oriental or a Vendor on or before the Closing
Date will have been performed or complied with in all material respects;
(c) all share purchase options and any other convertible securities of
Oriental will be exercised for, or converted into, shares of Oriental or
cancelled by the Closing Date;
(d) at least XXX 00 xxxxxxx xx xxx Xxxxxx Xxxxxxx Shareholder Loan (as
defined in Part 1 of Schedule A) is converted into the paid-in capital of
Shanxi Weiqida Pharmaceuticals Co. Ltd., a subsidiary of Oriental, and the
balance of the loan remains outstanding on the current terms of such loan
as set out in the definition of the Shanxi Weiqida Shareholder Loan;
(e) the Vendors' Shares will represent all outstanding shares of Oriental;
(f) Dragon having received all of the items listed in Section 6.2; and
(g) the Vendors acknowledging the satisfaction of, or waiving the
satisfaction of, the conditions set out in Section 4.1.
Waiver of Conditions by Dragon
4.4 The conditions set forth in Section 4.3 are for the exclusive benefit of
Dragon and may be waived by Dragon in whole or in part on or before the Closing
Date.
Conditions Precedent
4.5 The purchase and sale of the Vendors' Shares is subject to the following
conditions to be satisfied on or before the Closing Date:
(a) the obtaining of all Regulatory Approvals; and
(b) the obtaining of all Consents.
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PART 5
COVENANTS
Covenants of Oriental and Vendors
5.1 Oriental and the Vendors hereby covenant to Dragon that Oriental and the
Vendors will
(a) use all reasonable commercial efforts to obtain the Consents,
(b) use all reasonable commercial efforts to obtain all other necessary
approvals, consents, releases or waivers, including all applicable
Regulatory Approvals, as may be required to validly and effectively
consummate the transactions contemplated in this Agreement,
(c) file any documents required to be filed by them with a stock exchange
or other regulatory authority that is necessary to obtain a required
Regulatory Approval,
(d) use all reasonable commercial efforts to complete the transactions
contemplated in this Agreement,
(e) except to the extent permitted or required by this Agreement or
consented to by Dragon, which consent will not be unreasonably withheld,
from the date of this Agreement to the Closing Date,
(i) cause each of Oriental and each subsidiary thereof to conduct its
business in the ordinary and normal course of business consistent with
past practice,
(ii) not make any bonus payments to or increase the compensation or
benefits of any director, officer or employee, other than in the usual
and ordinary course of business consistent with past practice or
pursuant to existing contractual agreements,
(iii) cause each of Oriental and each subsidiary thereof to use all
reasonable efforts to maintain and preserve its existing goodwill and
business relationships in the ordinary and normal course of business
consistent with past practice,
(iv) not permit Oriental or any subsidiary thereof to enter into any
material agreements, other than in the normal and ordinary course of
its business, with any third party other than Dragon, and
(v) not permit Oriental or any subsidiary thereof to incur any debt,
obligation or guarantee other than in the ordinary and normal course
of business consistent with past practice nor permit any material
change in the share capital of Oriental or any subsidiary thereof,
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(f) except to the extent permitted or required by this Agreement or
consented to by Dragon, from the date of this Agreement up to and
including the Closing Date,
(i) not issue any shares or convertible securities in its capital
or that of a subsidiary,
(ii) except for any dividend or distribution that will be
concurrently contributed back as paid-in capital, not declare any
dividend on, or make other distributions in respect of its
outstanding shares (or securities convertible into shares), and
(iii) not make any distribution, payment or repayment to any
non-arm's length party or enter into any non-arm's length
contracts.
5.2 Notwithstanding the provisions of Section 5.1(e), Oriental will be entitled
to make payments to its arm's length contractors and suppliers for the
construction and initial operation of a 7-ACA production facility in Datong,
China.
Covenant on Financial Statements
5.3 Oriental will supply to Dragon audited financial statements and unaudited
quarterly financial statements of Oriental prepared in compliance with U.S.
GAAP, in a form and covering those periods sufficient for Dragon to prepare a
proxy statement or registration statement with the U.S. Securities and Exchange
Commission (the "SEC") and to meet its filing requirements with applicable
Canadian securities regulatory authorities and those stock exchanges or
quotation systems on which the shares of Dragon are listed.
Covenant on Escrow and Hold Periods
5.4 The Vendors agree that they will comply with all hold periods and any
escrow conditions imposed on them by any regulatory authority in connection with
the completion of the purchase of the Vendors' Shares. If any such escrow
conditions are imposed at the discretion of a Regulatory Authority, Dragon will
use all reasonable commercial efforts to minimize the conditions imposed on the
Vendors.
Covenants of Dragon
5.5 Dragon hereby covenants that it will
(a) use all reasonable commercial efforts to obtain the Consents,
(b) use all reasonable commercial efforts to obtain all other necessary
approvals, consents, releases or waivers, including all applicable
Regulatory Approvals, as may be required to validly and effectively
consummate the transactions contemplated in this Agreement,
(c) use all reasonable commercial efforts to complete the transactions
contemplated in this Agreement,
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(d) use all reasonable commercial efforts to ensure that the Dragon Shares
are, when issued, listed for trading on the Toronto Stock Exchange and on
the OTC Bulletin Board,
(e) except to the extent permitted or required by this Agreement or
consented to by the Vendors, which consent will not be unreasonably
withheld, from the date of this Agreement to the Closing Date,
(i) conduct its business in the ordinary and normal course of business
consistent with past practice,
(ii) not make any bonus payments to or increase the compensation or
benefits of any director, officer or employee, other than in the usual
and ordinary course of business consistent with past practice or
pursuant to existing contractual agreements,
(iii) use all reasonable efforts to maintain and preserve its existing
goodwill and business relationships in the ordinary and normal course
of business consistent with past practice,
(iv) not enter into any material agreements, other than in the normal
and ordinary course of its business, with any third party other than
Oriental and the Vendors, and
(v) not incur any debt, obligation or guarantee other than in the
ordinary and normal course of business consistent with past practice,
(f) except to the extent permitted or required by this Agreement or
consented to by the Vendors, from the date of this Agreement up to and
including the Closing Date,
(i) not issue any shares or convertible securities in its capital
(other than on the exercise of convertible securities that are
currently outstanding),
(ii) not declare any dividend on, or make other distributions in
respect of its outstanding shares (or securities convertible into
shares), and
(iii) not make any distribution, payment or repayment to any non-arm's
length party or enter into any non-arm's length contracts.
5.6 Notwithstanding the provisions of Section 5.5(e) and Section 5.5(f), Dragon
will be permitted to
(a) settle the terms of repayment of an approximately US$3.5 million debt
owed to Dragon by a director and former CEO, Dr. Longbin Liu, and
(b) make payments of up to (euro)400,000 for the development of a new EPO
cell-line with Polymun Scientific Immunbiologische Forschung GmbH.
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Notification of Expenses
5.7 From the date of this Agreement to the Closing Date, Dragon and the Vendors
will promptly inform the other if Dragon, Oriental or their subsidiaries enter
into any agreement or undertake any conduct permitted to be completed under this
Part without the consent of Dragon or the Vendors, as applicable, including
hiring any new employee, signing agreements or acquiring assets, if the value of
the agreement or annual financial impact is at least U.S.$100,000 in the case of
Dragon and U.S.$250,000 in the case of Oriental Wave and its subsidiaries.
Exclusive Dealing
5.8 From the date of this Agreement to the Closing Date, the parties will not,
directly or indirectly, solicit, initiate or encourage any expression of
interest, proposal or offers from, or negotiate with, or provide information to,
facilitate discussions with or otherwise co-operate in any way with, any person
(other than the parties hereto) relating to
(a) the acquisition or disposition of all or any substantial part of the
issued or unissued shares of
(i) Oriental or any of its affiliates, including the Vendors' Shares,
or
(ii) Dragon or any of its affiliates,
(b) any arrangement, amalgamation, merger, sale of assets, take-over bid,
reorganization, recapitalization, liquidation or winding-up of, or other
business combination or similar transaction involving
(i) Oriental or any of its affiliates and any other party, or
(ii) Dragon or any of its affiliates and any other party,
(each an "Alternative Transaction").
5.9 The parties agree to immediately notify each other, in writing, upon
receipt of any expression of interest, proposal or offer from any person
relating to any Alternative Transaction and will forthwith disclose to the other
parties all relevant details thereof. Notwithstanding such notice, none of the
Vendors or Oriental will respond to such expression of interest, proposal or
offer (except to decline it) but Dragon may respond as provided in Section 5.10.
5.10 Nothing in this Part will prevent the board of directors of Dragon from
responding to a proposal for an Alternative Transaction, or from completing an
Alternative Transaction, if the board believes in good faith that they have a
fiduciary duty to do so on the basis that such a transaction may result in a
transaction materially more favourable to Dragon or, if applicable, its
shareholders, than the Acquisition (a "Superior Alternative Transaction").
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Standstill
5.11 Oriental and the Vendors hereby covenant with Dragon, for itself and on
behalf of its affiliates and subsidiaries, that, absent the consent of Dragon,
none of them will, whether directly or indirectly, either individually or in
partnership or in conjunction with any person or persons, firm, association,
syndicate, joint venture, partnership, company or corporation as principal,
agent, or shareholder or in any other manner whatsoever, purchase or sell any
shares of Dragon (including any derivative securities) during the term of this
Agreement.
No Acquisitions
5.12 From the date of this Agreement to the Closing Date,
(a) Oriental will not, and will not permit any affiliate of Oriental to,
acquire or agree to acquire by amalgamation, arrangement, merger or
consolidation with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association of other business organization or division thereof or otherwise
acquire or agree to acquire any assets which are material, individually or
in the aggregate, to the business of Oriental, and
(b) except in the case of a Superior Alternative Transaction, Dragon will
not, and will not permit any affiliate of Dragon to, acquire or agree to
acquire by amalgamation, arrangement, merger or consolidation with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association of other business
organization or division thereof or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of Dragon.
No Dispositions
5.13 From the date of this Agreement to the Closing Date,
(a) Oriental will not, and will not permit any affiliate of Oriental to,
sell, lease, transfer, mortgage, encumber or otherwise dispose of any
material asset or cancel, release or assign any material indebtedness or
claim, except in the ordinary course of business consistent with past
practice, and
(b) Dragon will not, and will not permit any affiliate of Dragon to, sell,
lease, transfer, mortgage, encumber or otherwise dispose of any material
asset or cancel, release or assign any material indebtedness or claim,
except in the case of a Superior Alternative Transaction or in the ordinary
course of business consistent with past practice.
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PART 6
CLOSING
Closing
6.1 The Closing will take place at 10:00 a.m. local time, on August 31, 2004
(the "Closing Date") at the offices of Lang Xxxxxxxx at 1500 - 0000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxxx, XX X0X 0X0, or at such other place, date and time as may be
mutually agreed upon by the Parties acting reasonably, but in any event not
later than December 31, 2004.
Oriental and Vendor Deliveries
6.2 At the Closing, Oriental and each Vendor will execute and deliver or cause
to be executed and delivered to Dragon the following:
(a) share certificates representing the Vendors' Shares duly endorsed for
transfer, or accompanied by irrevocable security transfer powers of
attorney duly executed, in either case, by the holders of record, together
with evidence satisfactory to Dragon, acting reasonably, that Dragon or its
nominee(s) have been entered upon the books of Oriental as the holder of
the Vendors' Shares;
(b) a certificate of status, compliance, good standing or like certificate
with respect to Oriental and each of its subsidiaries issued by appropriate
government officials of their respective jurisdictions of incorporation;
(c) a certificate executed by each Vendor, in form and substance reasonably
satisfactory to Dragon, as to
(i) all of the representations and warranties of Oriental and each
Vendor contained in this Agreement and any other related documents and
instruments being true and correct in all material aspects on and as
at the Closing Date and with the same force and effect as though made
at such date, and
(ii) compliance with the conditions set out in this Agreement,
(d) the consents of the Vendors to their appointment to the board of
directors of Dragon;
(e) copies of all Consents required to be obtained by Oriental or a Vendor,
in form and substance satisfactory to Dragon;
(f) a copy of all Regulatory Approvals required to be obtained by Oriental
or a Vendor, in form and substance satisfactory to Dragon;
(g) a copy of the Escrow Agreement executed by each of the Vendors; and
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(h) all such other documents and instruments required to consummate the
transactions contemplated in this Agreement, including legal opinions
addressing the matters set out in Schedule D, as Dragon's legal counsel may
reasonably request.
Dragon Deliveries
6.3 At the Closing, Dragon will execute and deliver or cause to be executed and
delivered to the Vendors the following:
(a) share certificates representing the Dragon Shares, duly registered in
the names of the respective Vendors and in the proportions set out in
Section 2.5;
(b) certified copies of all resolutions of the shareholders and the board
of directors of Dragon approving the entering into and completion of the
transactions contemplated by this Agreement;
(c) a certificate of status, compliance, good standing or like certificate
with respect to Dragon and each of its subsidiaries issued by appropriate
government officials of their respective jurisdictions of incorporation;
(d) a certificate of an authorized senior officer of Dragon dated the
Closing Date, in form and substance reasonably satisfactory to the Vendors,
that
(i) all of the representations and warranties of Dragon contained in
this Agreement and any other related documents and instruments are
true and correct in all material aspects on and as at the Closing Date
and with the same force and effect as though made at such date,
(ii) Dragon has complied with all the terms, covenants and conditions
set out in this Agreement on its part to be complied with up to the
Closing, and
(iii) no order, ruling or determination having the effect of
suspending the issuance of the Dragon Shares or ceasing the trading in
any securities of Dragon is in effect and no proceedings for that
purpose have been instituted or, to the knowledge of such officer, are
pending or threatened or contemplated by any Regulatory Authority;
(e) a certificate of an authorized senior officer of Dragon dated the
Closing Date up-dating the information in Schedule B as to the number of
outstanding Dragon Convertible Securities;
(f) a resolution of the board of directors of Dragon appointing to the
Board each of the Vendors, or such other persons as nominated by the
Vendors, each of whom must be acceptable to the Regulatory Authorities
having jurisdiction over such appointment, and the resignation of three
persons from the five-member Board, effective at or before the Closing;
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(g) copies of all Consents required to be obtained by Dragon, in form and
substance satisfactory to the Vendors;
(h) a copy of all Regulatory Approvals required to be obtained by Dragon,
in form and substance satisfactory to the Vendors;
(i) a copy of the Escrow Agreement executed by Dragon and the escrow agent
appointed under such agreement;
(j) a copy of the letter from the Toronto Stock Exchange confirming that
the Dragon Shares have been approved for listing on the Toronto Stock
Exchange on issuance, subject only to the usual post-closing filing
conditions; and
(k) all such other documents and instruments required to consummate the
transactions contemplated in this Agreement, including legal opinions
addressing the matters set out in Schedule E, as legal counsel for the
Vendors may reasonably request.
PART 7
TERMINATION
Termination Time
7.1 If the Closing has not occurred on or before 5:00 p.m. (Pacific Time) on
December 31, 2004 (the "Termination Time"), this Agreement will be null and void
and of no further force and effect at and after the Termination Time.
Notwithstanding the termination of the Agreement, no Party will be released or
relieved from any liability arising from the breach by such Party as of or
before such time of any of its representations, warranties, covenants or
agreements contained in this Agreement.
Termination at any Time
7.2 This Agreement may be terminated at any time with the written consent of
each of the Parties.
7.3 The Vendors, acting jointly, may also terminate this Agreement if they
notify Dragon that they do not wish to proceed with the sale of the Vendors'
Shares on the basis that
(a) there has been a material decrease in the intrinsic value of Dragon as
a company, including but not limited to the value available to a proposed
acquirer in the goodwill and reputation of Dragon as a public company, or
(b) there is any indication of improper trading activity in Dragon's stock.
7.4 Dragon may terminate this Agreement at any time by notifying the Vendors
that Dragon's Board has identified and decided to pursue a Superior Alternative
Transaction.
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Fees and Expenses
7.5 Except as otherwise provided in this Agreement, Dragon, the Vendors and
Oriental agree that, whether or not the proposed transactions outlined herein
are consummated, they will pay their own fees and expenses, including any fee
for advice or opinions incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and any other agreements, documents,
opinions or valuations contemplated thereby or prepared in connection with the
sale of the Vendors' Shares and other transactions contemplated hereunder.
7.6 Notwithstanding Section 7.5, the parties agree that
(a) any fee payable in connection with a sponsorship report required to be
filed with the Toronto Stock Exchange in order to obtain the approval of
such exchange to completion of the purchase of the Vendors' Shares by
Dragon, will be shared equally between Dragon, on the one hand, and the
Vendors (on a joint and several basis), on the other hand, and
(b) if this Agreement is terminated pursuant to Section 7.3(a) (other than
with respect to a suit brought by Oriental, a Vendor or their affiliates,
or, provided that Dragon has fulfilled its covenants hereunder, as a result
of a failure to obtain shareholder or regulatory approval of the
acquisition of the Vendors' Shares) or Section 7.4, Dragon will, promptly
after receipt of reasonable particulars setting forth the expenses,
reimburse Oriental for the reasonable expenses actually incurred by
Oriental in connection with all matters relating to the Acquisition (not to
exceed US$500,000) including, without limitation, fees and disbursements of
counsel and auditors, consultants, and other financial advisors and travel
and communication expenses.
PART 8
INDEMNIFICATION
Indemnity by Oriental and Vendors
8.1 Oriental and the Vendors covenant and agree on demand to indemnify and hold
harmless Dragon from and against all Damages incurred by Dragon and arising,
directly or indirectly, from or in connection with
(a) any breach by Oriental or a Vendor of any representation or warranty
made by such party in this Agreement, the Schedules to this Agreement, or
any other certificate or document delivered pursuant to this Agreement;
(b) any breach by Oriental or a Vendor of any covenant or obligation of
such party in this Agreement; or
(c) any claim by any person for brokerage or finder's fees or commission or
similar payments based upon any agreement or understanding alleged to have
been made by any
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such person with Oriental or a Vendor (or any person acting on any of their
behalf) in connection with any of the transactions contemplated by this
Agreement.
Several Liability of Vendors
8.2 The liability of each Vendor will be several only and not joint and each
Vendor will be liable only for that percentage of the Damages equal to the
percentage that the shareholdings of Oriental of that Vendor represents in
relation to the issued and outstanding shares of Oriental.
Indemnity by Dragon
8.3 Dragon covenants and agrees on demand to indemnify and hold harmless the
Vendors from and against all Damages incurred by Oriental or a Vendor and
arising, directly or indirectly, from or in connection with
(a) any breach by Dragon of any representation or warranty made by it in
this Agreement, the Schedules to this Agreement, or any other certificate
or document delivered pursuant to this Agreement;
(b) any breach by Dragon of any covenant or obligation of Dragon in this
Agreement; or
(c) any claim by any person for brokerage or finder's fees or commission or
similar payments based upon any agreement or understanding alleged to have
been made by any such person with Dragon (or any person acting on its
behalf) in connection with any of the transactions contemplated by this
Agreement.
Time Limitations
8.4 If the Closing occurs, Oriental and the Vendors will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed or complied with on or before the Closing
Date, unless on or before the date that is two years after the Closing Date,
Dragon notifies Oriental and/or the Vendors of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Dragon.
8.5 If the Closing occurs, Dragon will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed or complied with on or before the Closing Date,
unless on or before the date that is two years after the Closing Date the
Vendors notify Dragon of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by the Vendors.
Limitation on Recovery From Vendors
8.6 If a valid claim is made under this Part by Dragon, Dragon's recovery will
be limited to requiring the return by a Vendor of Dragon Closing Shares then
held under
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the Escrow Agreement to the extent necessary to satisfy the claim. Any shares
returned from escrow under this section will be credited against the amount of
the claim by deducting from the amount due the product of the number of shares
returned for cancellation multiplied by the weighted average trading price of
the Common Shares on the principal stock exchange on which they trade for the 10
trading days commencing after a public announcement of the claim being made.
Notwithstanding the foregoing, there will be no limit on the Damages that Dragon
may recover from the Vendors in the case of fraud or intentional
misrepresentation.
Limitation on Recovery From Dragon
8.7 If a valid claim is made under this Part by a Vendor, the Vendors' recovery
will not exceed the value of the limitation on liability payments then in effect
for the Vendors as set out in Section 8.6. Notwithstanding the foregoing, there
will be no limit on the damages that the Vendors may recover from Dragon in the
case of fraud or intentional misrepresentation.
Notice of Breach
8.8 A party will, when it has determined that it has actual (and not attributed
or assumed) knowledge of facts or circumstances which give rise to a claim under
this Agreement against another party, promptly notify the other parties of such
facts or circumstances.
PART 9
CONFIDENTIAL INFORMATION
Obligations Not To Disclose
9.1 Dragon, and Oriental and each Vendor, agree that this Agreement and all
information about Oriental, and Dragon, respectively, obtained in connection
with this Agreement and in performance of due diligence will not be disclosed to
others or used other than for the activities contemplated hereunder, except as
required by law or by the rules and regulations of any regulatory authority or
stock exchange having jurisdiction or in connection with the filing of an annual
information form, prospectus or similar document, or with the written consent of
the other parties provided that the provisions of this Part do not apply to
information which is or becomes part of the public domain other than through a
breach of the terms hereof.
No Liability For Actions of Third Parties
9.2 No party will be liable to the others for the fraudulent or negligent
disclosure of information by any of its directors, employees, servants or
agents, provided that such party has taken reasonable steps to ensure the
preservation of the confidential nature of such information and takes legal
action against any of its directors, employees, servants or agents that makes a
fraudulent or negligent disclosure of such information.
-20-
PART 10
GENERAL
Vendors' Representative
10.1 Any amendment, modification, supplement, approval, consent, waiver or
termination of any provision of this Agreement that may or must be delivered by
the Vendors under this Agreement, may be executed and delivered solely by
Yan-Xxx Xxx on behalf of all of the Vendors and, when so executed and delivered,
will be binding on all the Vendors.
Survival of Representations, Warranties and Covenants
10.2 The representations, warranties and covenants of the Parties contained in
this Agreement will survive the Closing and the consummation of the transactions
contemplated by this Agreement for a period of two years and will not be
discharged, dissolved or terminated by the Closing.
Modifications, Approvals and Consents
10.3 No amendment, modification, supplement, approval, consent, waiver or
termination of any provision of this Agreement will be effective unless made in
writing and signed by each of the Parties having rights under this Agreement at
that time and then only in the specific instance and for the specific purpose
given; provided, however, that, if the amendment is of a type requiring
shareholder approval, the amendment will be valid only when such shareholder
approval is obtained.
Time of Essence
10.4 Time will be of the essence of this Agreement.
Successors
10.5 This Agreement will enure to the benefit of and be binding upon the Parties
and their respective heirs, executors, administrators, successors and permitted
assigns.
Assignment
10.6 This Agreement may not be assigned by any Party without the written consent
of the other Parties.
Press Releases
10.7 No Party will, and each Party will ensure that its affiliates, directors,
officers, employees and agents will not, issue any press release or make any
public statement related to this Agreement, the agreements and instruments
entered into pursuant to this Agreement or the transactions contemplated
hereunder or thereunder, without the prior consent of the other Parties, except
to the extent unless such press release or public statement is required by law,
-21-
in which case the party required to issue the press release or make the public
statement will use its commercially reasonable efforts to obtain the prior
approval of the other parties as to the form, nature and extent of the
disclosure.
Notices
10.8 Any notice required or permitted to be given under this Agreement must be
in writing and must be delivered or sent by facsimile transmission addressed as
applicable as follows:
(a) if to Dragon at:
1900 - 0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Chief Executive Officer
Facsimile: 0-000-000-0000
with a copy to:
Lang Xxxxxxxx LLP
Barristers & Solicitors
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
P.O. Box 11117
Xxxxxxxxx, XX X0X 0X0
Attention: Xxx Xxxxxx
Facsimile: (000) 000-0000
(b) if to the Vendors as follows:
Xxx-Xxx Xxx
Xxxx-Xxx Xxxx
c/o Shanxi Weiqida Pharmaceutical Co. Ltd.
Datong Economic and Technology Development Xxxx
Xxxxxx, Xxxxx 000000
Facsimile: + 86 352 6116451
Xue-Xxx Xxx
x/x Xxxxxxxx Xxxxxxxxxx
0/X, Xxxxx X, Xxxxxxx Center
Xx. 0, Xxxxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxx, Xxxxxxx, Xxxxx 100022
Facsimile: + 86 10 6566 2924
-22-
(c) if to Oriental, at:
x/x Xxx-Xxx Xxx
Xxxxxx Xxxxxxx Pharmaceutical Co. Ltd.
Datong Economic and Technology Development Xxxx
Xxxxxx, Xxxxx 000000
Facsimile: + 86 352 6116451
with a copy to:
Bull, Housser & Xxxxxx
Barristers & Solicitors
3000 - 0000 Xxxx Xxxxxxx Xxxxxx
P.O. Box 11130
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
or to such other address as any Party may specify by notice in writing to the
other.
Delivery
10.9 A notice delivered or sent in accordance with the preceding section will be
deemed to be given and received
(a) at 9:00 a.m. on the day of delivery or receipt at the place of delivery
or receipt if that day is a Business Day at that place and the delivery or
receipt is before that time on that day,
(b) at the time of delivery or receipt if received on or after 9:00 a.m.
and before 4:00 p.m. at the place of delivery or receipt on a day that is a
Business Day at that place, and
(c) at 9:00 a.m. at the place of delivery or receipt on the next day that
is a Business Day at that place, if delivered or received on a day that is
not a Business Day at that place or after 4:00 p.m. at that place.
Language of Document
10.10 All correspondence in respect of this Agreement or the enforcement of
rights of the parties hereunder will be made in the English language only.
Arbitration
10.11 A dispute ("Dispute") between the parties as to of the interpretation of
this Agreement, as to a matter to be agreed under this Agreement or otherwise
arising under this Agreement, will be determined by arbitration in accordance
with the provisions of the Commercial Arbitration Act (British Columbia) based
upon the following:
-23-
(a) the arbitration will be initiated by a party to the Dispute delivering
a written notice to the other party to the Dispute setting out a
description of the Dispute to be submitted to arbitration;
(b) the arbitration tribunal will consist of one arbitrator appointed by
mutual agreement of the Parties, or in the event of failure to agree within
10 Business Days following delivery of the written notice to arbitrate, by
an arbitrator appointed pursuant to the Commercial Arbitration Act (British
Columbia);
(c) the arbitrator must be qualified by education and training to pass upon
the particular matter to be decided;
(d) the arbitrator will be instructed that time is of the essence in the
arbitration proceeding and, in any event, the arbitration award must be
made within 30 days of the submission of the Dispute to arbitration;
(e) after written notice is given to refer any Dispute to arbitration, the
Parties will meet within 15 Business Days of delivery of the notice and
will negotiate in good faith any changes in these arbitration provisions or
the rules of arbitration which are herein adopted, in an effort to expedite
the process and otherwise ensure that the process is appropriate given the
nature of the Dispute and the values at risk;
(f) the arbitration will take place in Vancouver, British Columbia;
(g) the arbitration decision will be given in writing and will be final and
binding on the Parties, not subject to any appeal, and will deal with the
question of costs of arbitration and all related matters;
(h) judgment upon any award may be entered in any Court having jurisdiction
or application may be made to the Court for a judicial recognition of the
award or an order of enforcement, as the case may be;
(i) all Disputes referred to arbitration (including the scope of the
agreement to arbitrate, any statute of limitations, set-off claims,
conflict of laws rules, tort claims and interest claims) will be governed
by the substantive law of British Columbia; and
(j) the Parties agree that the arbitration will be kept confidential and
that the existence of the proceeding and any element of it (including any
pleadings, briefs or other documents submitted or exchanged, any testimony
or other oral submissions and any awards) shall not be disclosed beyond the
arbitrator, the Parties, their counsel and any person necessary to the
conduct of the proceeding, except as may lawfully be required in judicial
proceedings relating to the arbitration or otherwise.
-24-
Further Assurances
10.12 Each Party will, on demand by any other Party, execute and deliver such
further documents and instruments and do all such acts and things as the other
Party may either before or after the Closing Date reasonably require to
evidence, carry out and give full effect to the terms, conditions, intent and
meaning of this Agreement.
Governing Law
10.13 This Agreement is and will be deemed to be made in British Columbia and
for all purposes will be governed exclusively by and construed and enforced in
accordance with the laws prevailing in British Columbia, and the rights and
remedies of the parties will be determined in accordance with those laws.
Attornment
10.14 Each party irrevocably and exclusively attorns to the jurisdiction of the
courts of British Columbia and all courts having appellate jurisdiction
thereover, and any proceeding commenced or maintained by a party in respect of
this Agreement will be commenced or maintained only in such of those courts as
is appropriate.
Entire Agreement
10.15 Except for the Confidentiality Agreement dated effective April 1, 2003,
which remains in force in accordance with its terms, this Agreement and all
Schedules hereto contain the entire agreement among the Parties in respect of
the subject matter hereof and there are no warranties, representations, terms,
conditions or collateral agreements, express, implied or statutory, other than
as expressly set forth in this Agreement and the Schedules hereto.
-25-
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
day and year first above written.
DRAGON PHARMACEUTICAL INC.
Per: /s/ Xxxxxxxxx Xxxx
-----------------------------------
Xx. Xxxxxxxxx Xxxx
President and Chief Executive Officer
ORIENTAL WAVE HOLDING LTD.
Per: /s/ Yan-Xxx Xxx
------------------------------------
Xx. Xxx-Xxx Xxx
Signed, Sealed and Delivered by Yan-Xxx Xxx )
in the presence of: )
)
)
/s/ Xxxxx Xxxx ) /s/ Yan-Xxx Xxx
--------------------------------------------) --------------------------
Witness (Signature) ) YAN-XXX XXX
)
Xxxxx Xxxx )
--------------------------------------------)
Name (please print) )
)
1900 - 1055 West Hasting St. )
--------------------------------------------)
Address )
)
Vancouver, BC )
--------------------------------------------)
City, Province )
)
Manager )
--------------------------------------------)
Occupation
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Signed, Sealed and Delivered by Zhan-Guo )
Weng in the presence of: )
)
)
)
/s/ Xxxxx Xxx ) /s/ Zhan-Xxx Xxxx
--------------------------------------------) ----------------------------
Witness (Signature) ) ZHAN-XXX XXXX
)
Xxxxx Xxx )
--------------------------------------------)
Name (please print) )
)
--------------------------------------------)
Address )
)
--------------------------------------------)
City, Province )
)
--------------------------------------------)
Occupation )
Signed, Sealed and Delivered by Xue-Xxx Xxx )
in the presence of: )
)
)
/s/ ) /s/ Xye-Xxx Xxx
--------------------------------------------) -----------------------------
Witness (Signature) ) XUE-XXX XXX
)
--------------------------------------------)
Name (please print) )
)
--------------------------------------------)
Address )
)
--------------------------------------------)
City, Province )
)
--------------------------------------------)
Occupation )
SCHEDULE A
Representations and Warranties
PART 1 Definitions
In this Schedule A, including all appendices attached hereto, except as
otherwise expressly provided or unless the context otherwise requires,
capitalized words and terms have the meaning ascribed to them in the Agreement
and
"Accounts Receivable" means, with respect to any Person, accounts receivable,
trade accounts receivable, notes receivable, book debts and other debts due or
accruing due to that Person, and the full benefit of any related security;
"Affiliate" has the meaning ascribed to it in the Canada Business Corporations
Act (Canada) as at the date of this Agreement;
"Applicable Law" means
(a) any statute, law (including common and civil law), code, ordinance,
rule, regulation, restriction or by-law (zoning or otherwise),
(b) any judgement, order, writ, injunction, decision, ruling, decree or
award,
(c) any regulatory policy, practice or guideline, or
(d) any Approval,
of any Regulatory Authority, binding on or affecting the Person referred to in
the context in which the term is used or binding on or affecting the property of
that Person;
"Approval" means any franchise, licence, qualification, authorization, consent,
certificate, registration, exemption, waiver, filing, grant, notification,
privilege, right, order, judgement, ruling, directive, permit or other approval;
"Assets" means, with respect to any Person, all undertakings, property, assets,
rights and interests of that Person, including
(a) all equity contribution, ownership and shareholder rights and interests
of that Person in another Person,
(b) the Real Property of that Person and all rights and interests of that
Person in and to its Real Property Leases, including prepaid rents,
security deposits, options to renew or purchase, rights of first refusal
under the Real Property Leases and all leasehold improvements owned by that
Person,
-2-
(c) the Personal Property of that Person and all rights and interests of
that Person in and to its Personal Property Leases, including prepaid
rents, security deposits and options to renew or purchase,
(d) the Accounts Receivable of that Person,
(e) all rights and interests of that Person under or pursuant to all
warranties, representations and guarantees, express, implied or otherwise,
of or made by suppliers or others in connection with its Assets,
(f) the Intellectual Property of that Person,
(g) all rights and interests of that Person in and to all Contracts to
which that Person is a party or by which any of its Assets or Business is
bound or affected,
(h) all Approvals issued to that Person, (i) the Books and Records of that
Person,
(j) all prepaid charges, deposits, sums and fees paid by that Person before
the Closing, (k) all goodwill of that Person, including the present
telephone numbers, internet domain addresses and other communications
numbers and addresses of that Person, and
all proceeds of any or all of the foregoing received or receivable after the
Closing;
"Associate" has the meaning ascribed to it in the Canada Business Corporations
Act (Canada) as at the date of this Agreement;
"Aurobindo Tongling" means Aurobindo Tongling (Datong) Pharmaceutical Co., Ltd.;
"Books and Records" means, with respect to any Person, all books, records, files
and papers of that Person, including computer and software programs and all
source code thereof, computer manuals, computer data, financial and tax working
papers, financial and tax books and records, business reports, business plans
and projections, sales and advertising materials, sales and purchases records
and correspondence, trade association files, copies of applications for Material
Approvals and Material correspondence with third parties (including Governmental
Authorities) relating to the Approvals, research and development records, lists
of present and former customers and suppliers, personnel and employment records,
minute and share certificate books, and all copies and recordings of the
foregoing;
"Business" means, with respect to any Person, the business carried on currently
and prior to the date of this Agreement by that Person;
"Canadian First" means Canadian First Pharmaceutical Co., Ltd.;
-3-
"Contract" means any agreement, contract, indenture, lease, deed of trust,
licence, option, undertaking, promise or any other commitment or obligation,
whether oral or written, express or implied;
"Claim" means
(a) any suit, action, dispute, investigation, claim, arbitration, order,
summons, citation, directive, ticket, charge, demand or prosecution,
whether legal or administrative,
(b) any other proceeding, or (c) any appeal or application for review,
at law or in equity or before or by any Regulatory Authority;
"Datong No. 2 Pharma" means Datong No. 2 Pharmaceutical Factory;
"Datong Pharma" means Datong Pharmaceutical Factory;
"Domestic Shanxi Weiqida" means Shanxi Weiqida Pharmaceutical Co., Ltd., a
domestic People's Republic of China company;
"Dragon Financial Statements" means the audited financial statements of Dragon
for the one-year period ended on the Financial Statement Date;
"Dragon Subsidiary" means any one of Dragon Pharmaceuticals (Canada) Inc.,
Allwin Newtech Ltd., Allwin Biotrade Ltd., Nanjing Huaxin Bio-pharmaceutical
Co., Ltd. and Sanhe Kailong Biopharmaceutical Co., Ltd. and "Dragon
Subsidiaries" means, collectively, each Dragon Subsidiary;
"Encumbrance" means any mortgage, charge, pledge, hypothecation, security
interest, lien, easement, right-of-way, encroachment, covenant, condition, right
of re-entry, lease, licence, assignment, option or claim or any other
encumbrance or title defect of whatsoever nature or kind, regardless of form,
whether or not registered or registrable and whether or not consensual or
arising at law (statutory or otherwise);
"Environmental Contamination" means the release, discharge or existence of any
substance harmful to public health, employee health or safety or the environment
including any Hazardous Material or any other pollutant or contaminant;
"Environmental Protection Laws" means all Canadian or non-Canadian statutes,
regulations, laws, by-laws, rules, permits, codes, ordinances, orders,
directives, policies, standards, guidelines and lawful requirements of any
competent authority in force from time to time and all judicial and
administrative decisions with respect to protection of the environment, public
health, occupational health and safety or regulating Hazardous Materials or
Environmental Contamination or with respect to the storage, manufacture,
disposal, treatment, generation, use, transport, remediation, release into the
environment of or the exposure to Hazardous Materials;
-4-
"Equity Interest" means, with respect to any Person, any and all present or
future shares, units, trust units, partnership, contribution or other interest,
participation or other equivalent right in that Person's equity or capital,
however designated and whether voting or non-voting;
"Financial Statement Date" means December 31, 2003;
"Hazardous Materials" means radioactive materials, pollutants, contaminants,
hazardous, flammable, explosive, corrosive or toxic substances or special waste
of any kind and any substance the storage, manufacture, disposal, treatment,
generation, use, transport, remediation or release of which is prohibited,
controlled, regulated or licensed by an applicable Regulatory Authority;
"Information Technology" means, with respect to any Person, the computer
equipment and associated peripheral devices and the related operating and
application systems and other software used, owned, leased or licensed by that
Person;
"Intellectual Property" means, with respect to any Person, all patents
(including utility patents, design patents, registered industrial designs,
utility models and certificates of addition), patent applications, copyright,
trade marks (including trade names, business names and service marks),
semiconductor topography rights, information rights in computer software and
databases and such similar instruments or rights which are recognized in any
jurisdiction, and all trade secrets, know-how, product Approvals, manufacturing
Approvals (including Certificates of Good Manufacturing Practices for
Pharmaceutical Products) and all other Approvals to produce and market
pharmaceutical products owned or used by that Person or in which that Person has
any right or interest;
"Land Use Right No. 1" means the land use right granted to Domestic Shanxi
Weiqida in respect of a piece of land located at Fanzhuang Village, Datong
Development District, South of Dayang Line, Datong City, having a total area of
38,637 square meters;
"Material" means of such a nature or amount as would reasonably be regarded as
significant in relation to the subject matter or in relation to the capital,
prospects, condition (financial or otherwise) or results of operation of the
Person to which reference is made and "Materially" has a corresponding meaning;
"Material Adverse Change" and "Material Adverse Effect" means any change or
effect that Materially adversely affects the ability of any Person to conduct
its Business after the Closing Date substantially as its Business has been
conducted to the date of this Agreement;
"Material Contract" means, with respect to any Person, any Contract to which
that Person is a party or by which that Person or any of its Assets are bound or
attached, which involves or may reasonably involve a payment to or by that
Person in excess of $250,000 in the case of Oriental or Shanxi Weiqida or
$100,000 in the case of Dragon over the term of the Contract;
"Ordinary Course" means, with respect to an action taken by any Person, that the
action is consistent with the past practices of that Person and is taken in the
normal day-to-day operations of that Person;
-5-
"Oriental Financial Statements" means the audited financial statements of
Oriental for the two-year period ended on the Financial Statement Date;
"OTCBB" means the OTC Bulletin Board;
"Personal Property" means, with respect to any Person, each item of machinery,
equipment, furniture, motor vehicles and other personal property owned or leased
by that Person (including those in possession of third parties) which had a book
value of more than $24,000 in the accounting records of that Person determined
in accordance with GAAP, as at the date of the most recently completed financial
year of that Person or is otherwise Material to its Business;
"Personal Property Leases" means, with respect to any Person, all equipment
leases, chattel leases, rental agreements, conditional sales agreements and
similar Contracts in respect of any Assets other than Real Property to which
that Person is a party;
"Real Property" means, with respect to any Person, all real property,
appurtenances and interests therein, including land use rights, owned or leased
by that Person (including those in possession of third parties);
"Real Property Leases" means, with respect to any Person, all leases and
Contracts in the nature of a lease (including all renewals, assignments and
subleases and agreements to lease) in respect of any Real Property to which that
Person is a party;
"Regulatory Authority" means any federal, provincial, state, municipal, county
or regional governmental or quasi-governmental authority, domestic or foreign,
and includes any ministry, department, commission, bureau, board, administrative
or other agency or regulatory body or instrumentality thereof and includes any
Person exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government by which Oriental, Shanxi
Weiqida, the Vendors or Dragon or their respective Business and Assets is bound
or to which any of the foregoing is subject, including any stock exchange on
which any of their securities trade;
"SEC" means the U.S. Securities and Exchange Commission;
"Shanxi Weiqida" means Shanxi Weiqida Pharmaceutical Co., Ltd., a foreign
invested People's Republic of China company;
"Shanxi Weiqida Shareholder Loan" means the interest-free loan in the amount of
RMB42,000,000 made by Shanxi Tongling Pharmaceutical Co., Ltd. to Shanxi
Weiqida, the repayment terms of which are RMB20,000,000 to be repaid on or
before the Closing Date through conversion into a RMB20,000,000 capital
contribution to Shanxi Weiqida by Oriental as contemplated in Section 4.3(d) of
the Agreement, RMB 11,000,000 to be repaid on December 31, 2005 and
RMB11,000,000 to be repaid on May 30, 2006;
"Tax Laws" means means all Canadian or non-Canadian statutes, regulations, laws,
by-laws, rules, permits, codes, ordinances, orders, directives, policies,
standards, guidelines and lawful requirements of any competent authority in
force from time to time and all judicial and administrative decisions with
respect to Taxes;
-6-
"Taxes" means all taxes, charges, fees, levies or other assessments payable
under foreign laws or the laws of Canada or any province, municipality or other
political subdivision thereof, including, without limitation, income taxes,
excise taxes, sales taxes, goods and services taxes, value added taxes, transfer
taxes, property taxes, capital taxes, import and customs duties, employment,
payroll, withholding, business, mining or other taxes, and other governmental
charges and assessments, and includes additions by way of penalties, interest
and fines and other amounts with respect thereto;
"Tongzhen" means Shanxi Tongzhen Pharmaceutical Co., Ltd.; and
"TSX" means the Toronto Stock Exchange.
PART 2 Representations and Warranties of Each Vendor Relating to the Vendor and
the Vendors' Shares Owned by the Vendor
1. Authority. The Vendor has all
necessary legal right, authority and capacity to execute and deliver this
Agreement, to transfer the legal and beneficial title and ownership of the
Vendors' Shares owned by the Vendor to Dragon and to perform all of the Vendor's
obligations hereunder.
2. Enforceability. This Agreement has been duly executed and delivered by the
Vendor and (assuming due execution and delivery by the other parties) is a
legal, valid and binding obligation of the Vendor enforceable against the Vendor
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting the rights of creditors
generally and except that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction. Each of the Contracts and
instruments required by this Agreement to be delivered by the Vendor at the
Closing will have been duly executed and delivered by the Vendor and (assuming
due execution and delivery by the other parties thereto) will be enforceable
against the Vendor in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency and other laws affecting the rights of
creditors generally, except that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction and rights to indemnity and the
ability to sever unenforceable terms may be limited by applicable law.
3.
Consents. Except as disclosed in this Agreement, no Approval of any Person, and
no registration, declaration or filing by the Vendor with any Person, is
required in order for the Vendor to,
(a) incur the Vendor's obligations pursuant to this Agreement,
(b) execute and deliver this Agreement and all other documents and
instruments to be delivered by the Vendor pursuant to this Agreement,
(c) duly perform and observe the terms and provisions of this Agreement and
each other Contract or instrument to be entered into pursuant to this
Agreement, including the indirect transfer of control over Shanxi Weiqida,
and
(d) render this Agreement legal, valid, binding and enforceable on the
Vendor.
4. No Conflict. The execution, delivery and performance by the Vendor of this
Agreement and the completion of the Closing will not (whether after the lapse of
time, giving of notice or both), result in
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any of the
Vendor's obligations, under
(i) any Contract to which the Vendor is a party or by which any of the
Vendor's Assets are bound or affected,
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(ii) any Approval issued to or held by or for the benefit of the
Vendor or necessary to ownership of the Vendors' Shares owned by the
Vendor,
(iii) any judgment, decree, order or award of any court, Regulatory
Authority or arbitrator having jurisdiction over the Vendor, or
(iv) any Applicable Law,
(b) the creation of any Encumbrance on any of the Vendors' Shares owned by
the Vendor, or
(c) the requirement of any Approval from any of the Vendor's creditors.
5. No Claims. There are no Claims (whether or not on the Vendor's behalf)
pending or outstanding or, to the Vendor's knowledge, threatened against the
Vendor which could reasonably be expected to adversely affect the Vendors'
Shares owned by the Vendor or its ability to perform its obligations under this
Agreement. To the Vendor's knowledge there is not any factual or legal basis on
which any such bona fide Claim might reasonably be expected to be commenced.
6. Ownership of Vendor's Shares. The Vendor is the registered and beneficial
owner of the Vendors' Shares owned by the Vendor, with good and marketable title
thereto, free and clear of all Encumbrances, and has the exclusive right to
dispose of such Vendors' Shares as provided in this Agreement. None of the
Vendors' Shares owned by the Vendor are subject to (i) any Contract or
restriction which in any way limits or restricts the transfer to Dragon of such
Vendors' Shares; or (ii) any voting trust, pooling agreement, shareholder
agreement, voting agreement or other Contract, arrangement or understanding with
respect to the voting of any or all of such Vendors' Shares which will not have
been terminated before the Closing. On completion of the Closing, the Vendor
will have no ownership interest in Oriental, whether direct or indirect, actual
or contingent, and Dragon will have good title to the Vendors' Shares owned by
the Vendor, free and clear of all Encumbrances.
7. Vesting of Title to Vendors'
Shares. The consummation of the transactions contemplated in this Agreement will
vest in Dragon sole legal and beneficial title to the Vendors' Shares owned by
the Vendor free and clear of any Encumbrances effective on the Closing Date.
8. No Other Agreements to Purchase. No Person other than Dragon has any Contract
or any right or privilege (whether by law, pre-emptive or contractual) capable
of becoming a Contract for the purchase or acquisition from the Vendor of any of
the Vendors' Shares owned by the Vendor.
9. Solvency. The Vendor is not an insolvent Person within the meaning of the
Bankruptcy and Insolvency Act (Canada) or any other similar legislation in any
jurisdiction and has not made an assignment in favour of, or a proposal in
bankruptcy to, the Vendor's creditors or any class thereof, and no petition for
a receiving order has been presented in respect of the Vendor. The Vendor has
not initiated proceedings with respect to a compromise or arrangement with the
Vendor's creditors or for its winding up, liquidation or dissolution. No
receiver or interim receiver has been appointed in respect of the Vendor or any
of the Vendor's Assets (including
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the Vendors' Shares owned by the Vendor) and no execution or distress has been
levied on any of the Vendor's Assets (including the Vendors' Shares owned by the
Vendor), nor have any proceedings been commenced in connection with any of the
foregoing.
10. No Undisclosed Information. The Vendor does not have any information or
knowledge of any fact or circumstance which adversely affects the Vendor's
ability to complete the transactions contemplated in this Agreement that has not
been disclosed to Dragon pursuant to this Agreement and neither this Agreement
nor any other document or certificate furnished to Dragon by the Vendor in
connection with such transactions contains any Material error or omission or
untrue, misleading or incomplete statement of Material fact.
11. Independent Legal Advice. Before the execution of this Agreement, the Vendor
has read and fully understands the terms of this Agreement and has had the
opportunity to seek independent legal advice with respect to the matters
addressed in this Agreement, and has obtained such independent legal advice or
has determined such advice is not required and the Vendor fully understands and
accepts the terms of this Agreement. The Vendor confirms that the Vendor is
executing this Agreement freely, voluntarily and without duress.
12. Validity. All of the foregoing representations and warranties of the Vendor
will be true and correct on the Closing Date as if made on that date.
PART 3 Representations and Warranties of Oriental and Each Vendor Relating to
Oriental and Shanxi Weiqida
1. Oriental Status. Oriental is duly incorporated and organized, and is validly
existing, under the laws of the British Virgin Islands and is up-to-date in the
filing of all corporate and similar returns under the laws of that jurisdiction.
Oriental carries on its Business only in the People's Republic of China, and has
made all filings and holds all registrations, licensing and other qualifications
to carry on its Business in such jurisdictions.
2. Subsidiaries of Oriental. Except for Shanxi Weiqida, Oriental has not owned,
does not own, and does not have any Contract to acquire or lease, directly or
indirectly, any Equity Interest in, or any proprietary interest in the Assets or
Business of, any other Person.
3. Ownership of Shanxi Weiqida. Oriental owns and has good and marketable title
to the entire Equity Interest in Shanxi Weiqida as the legal and beneficial
owner free and clear of all Claims and Encumbrances and such Equity Interest has
been duly registered.
4. Shanxi Weiqida Status. Shanxi Weiqida is duly incorporated and organized, and
is validly subsisting, under the laws of the People's Republic of China and is
up-to-date in the filing of all corporate and similar returns under the laws of
that jurisdiction. Shanxi Weiqida carries on its Business only in the People's
Republic of China, and has made all filings and holds all registrations,
licensing and other qualifications to carry on its Business in such
jurisdictions.
5. Subsidiaries of Shanxi Weiqida. Shanxi Weiqida has not owned, does not own,
and does not have any Contract to acquire or lease, directly or indirectly, any
Equity Interest in, or any proprietary interest in the Assets or Business of,
any other Person.
6. Corporate Power and Capacity. Each of Oriental and Shanxi Weiqida has the
corporate power and corporate capacity to carry on their Business and to own
their Assets and Oriental has the corporate power and corporate capacity to
enter into this Agreement and perform its obligations hereunder.
7. Share Capital of Oriental. The authorized share capital of Oriental consists
of 50,000 shares all of which are issued and outstanding. Each of the issued and
outstanding shares of Oriental has been duly and validly issued and is
outstanding as a fully paid and non-assessable share in the capital of Oriental
and
(a) Yan-Xxx Xxx is the registered and beneficial owner of 35,000 shares,
(b) Zhan-Xxx Xxxx is the registered and beneficial owner of 10,000 shares;
and
(c) Xue-Xxx Xxx is the registered and beneficial owner of 5,000 shares.
8. Rights to Purchase Oriental Shares. Except as provided in this Agreement, no
Person has any right or Contract, present or future, contingent or absolute, or
any right capable of becoming a right or Contract, for the acquisition of any
Equity Interest in Oriental.
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9. Share Capital of Shanxi Weiqida. Oriental owns 100% of the Equity Interest in
Shanxi Weiqida and is the only Person obligated to make additional capital
contributions to Shanxi Weiqida.
10. Rights to Purchase Shanxi Weiqida Shares. Except for Oriental, no Person has
any right or Contract, present or future, contingent or absolute, or any right
capable of becoming a right or Contract, to make any capital contribution, or
for the acquisition of any Equity Interest, in Shanxi Weiqida.
11. Directors and Officers. The directors of Oriental are as follows:
Directors: Xxx-Xxx Xxx
Xxxx-Xxx Xxxx
Xxx-Xxx Xxx
and the directors and officers of Shanxi Weiqida are as follows:
Directors: Xxx-Xxx Xxx
Xxxx-Xxx Xxxx
Xxx-Xxx Xxx
Xxxx-Xxxx Xxx
Officers: Yan-Xxx Xxx - Legal Representative
Zhan-Xxx Xxxx - General Manager
12. Enforceability. This Agreement and all other Contracts and instruments to be
executed and delivered by Oriental pursuant to this Agreement have been duly
authorized, executed and delivered by Oriental and constitute legal, valid and
binding obligations of Oriental and are enforceable against Oriental in
accordance with their terms, except to the extent that
(a) the availability of equitable remedies is subject to the discretion of
applicable judicial authority,
(b) enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to
the rights of creditors generally, and
(c) rights to indemnity and the ability to sever unenforceable terms may be
limited by applicable law.
13. Consents. Except as expressly set out in this Agreement, no Approval of any
Person, and no registration, declaration or filing by Oriental or Shanxi Weiqida
with any Person, is required in order for Oriental to,
(a) incur its respective obligations pursuant to this Agreement,
(b) execute and deliver this Agreement and all other documents and
instruments to be delivered by it pursuant to this Agreement,
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(c) duly perform and observe the terms and provisions of this Agreement and
any other agreements or instruments to be entered into pursuant to this
Agreement, including the indirect transfer of control over Shanxi Weiqida,
and
(d) render this Agreement legal, valid, binding and enforceable on them.
14. No Conflict. The execution, delivery and performance by Oriental of this
Agreement and the completion of the Closing will not (whether after the lapse of
time, giving of notice or both), result in
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any obligation
of Oriental or Shanxi Weiqida, under
(i) any Contract to which Oriental or Shanxi Weiqida is a party or by
which any of their undertakings or Assets are bound or affected,
(ii) any provision of their constating documents, by-laws, articles or
resolutions of their boards of directors (or any committees thereof)
or shareholders,
(iii) any Approval issued to, held by or for the benefit of, Oriental
or Shanxi Weiqida,
(iv) any judgment, decree, order or award of any court, Regulatory
Authority or arbitrator having jurisdiction over Oriental or Shanxi
Weiqida, or
(v) any Applicable Law,
(b) the creation of any Encumbrance on any of the Assets of Oriental or
Shanxi Weiqida, or
(c) the requirement of any Approval from any of the creditors of Oriental
or Shanxi Weiqida.
15. No Claims. There are no Claims (whether or not on behalf of Oriental or
Shanxi Weiqida) pending or outstanding or, to Oriental's or the Vendor's
knowledge, threatened against Oriental or Shanxi Weiqida which could reasonably
be expected to adversely affect any of their Assets or Oriental's ability to
perform its obligations under this Agreement or to have a Material Adverse
Effect on Oriental or Shanxi Weiqida. To Oriental's knowledge there is not any
factual or legal basis on which any such bona fide Claim might reasonably be
expected to be commenced.
16. Solvency. Neither Oriental nor Shanxi Weiqida is an insolvent Person within
the meaning of the Bankruptcy and Insolvency Act (Canada) or any other similar
legislation in any jurisdiction and neither of them has made an assignment in
favour of, or a proposal in bankruptcy to its, respective creditors or any class
thereof, and no petition for a receiving order has been presented in respect of
Oriental or Shanxi Weiqida. Neither Oriental nor Shanxi
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Weiqida has initiated proceedings with
respect to a compromise or arrangement with its creditors or for its
winding up, liquidation or dissolution. No receiver or interim receiver has
been appointed in respect of Oriental or Shanxi Weiqida or any of their
Assets and no execution or distress has been levied on any of their Assets,
nor have any proceedings been commenced in connection with any of the
foregoing.
17. No Undisclosed Information. Oriental and the Vendor do not have any
information or knowledge of any fact or circumstance which adversely affects
Oriental's ability to complete the transactions contemplated in this Agreement
and neither this Agreement nor any other document or certificate furnished to
Dragon by Oriental in connection with such transactions contains any Material
error or omission or untrue, misleading or incomplete statement of Material
fact. 18. Asset Acquisitions.
(a) All of the
(i) Assets of Domestic Shanxi Weiqida, Datong No. 2 Pharma and Datong
Pharma,
(ii) injectable and capsule pharmaceutical production line and product
Assets of Aurobindo Tongling, and
(iii) pharmaceutical product Approvals of Tongzhen,
were duly transferred to Shanxi Weiqida and such Asset transfers were duly
completed in accordance with the terms of all applicable agreements,
decrees, bankruptcy proceedings and Applicable Law, such bankruptcy
proceedings extinguished all claims to such Assets by all Persons other
than Shanxi Weiqida and there are no outstanding rights, obligations or
Claims of any Person with respect to such agreements, decrees, bankruptcy
proceedings, Assets or Asset transfers that are not reported in the
Oriental Financial Statements.
(b) The agreement among Datong Economic Committee, Datong No. 2 Pharma and
Shanxi Weiqida under which Shanxi Weiqida assumed responsibility for all of
the employees of Datong No. 2 Pharma has been duly and fully performed in
accordance with the terms of that agreement and all Applicable Law and
there are no outstanding rights, obligations or Claims of any Person with
respect to such agreement or assumption of employees.
(c) Except as described herein, Shanxi Weiqida has not entered into and is
not bound by any Contract for the acquisition of Assets related to the
right to produce any product.
(d) Each of Domestic Shanxi Weiqida, Tongzhen, Datong No. 2 Pharma and
Datong Pharma has been dissolved and is not a validly existing entity.
19. Conduct of Business. Except as expressly permitted pursuant to this
Agreement, neither Oriental nor Shanxi Weiqida have, since April 4, 2004,
directly or indirectly sold any Assets or entered into any Contract or
transaction that will affect their Business other than in the Ordinary Course of
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their Business. Each of Oriental and Shanxi Weiqida has complied with, and has
conducted and is conducting their Business in compliance in all Material
respects with, all Applicable Law. Their Business is the only business operation
carried on by Oriental and Shanxi Weiqida and their Assets are sufficient to
permit the continued operation of their Business from and after the Closing Date
in substantially the same manner as conducted in the one-year period immediately
preceding the date of this Agreement.
20. Corporate Records. The corporate records of Oriental and Shanxi Weiqida
contain complete and accurate records of all resolutions passed by such
companies' shareholders and directors since the date of such companies'
incorporation and all other matters required to be recorded therein under the
laws of their respective jurisdictions of incorporation and Business. All
Material transactions affecting Oriental and Shanxi Weiqida have been properly
recorded or filed in their respective corporate and other record books. The
registers, including the securities registers and registers of directors and
officers, of Oriental and Shanxi Weiqida are complete and accurate and will, on
the Closing Date, reflect all transactions contemplated by this Agreement.
21. Financial Records. The system of internal accounting controls is sufficient
to provide reasonable assurances that all Material transactions affecting
Oriental or Shanxi Weiqida are executed in accordance with management's general
or specific authorization and that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain accountability for Assets.
22. Financial Statements. The Oriental Financial Statements are true, correct
and complete in every Material respect, have been prepared in accordance with
GAAP and fairly and accurately reflect in every Material way the financial
position of Oriental and Shanxi Weiqida as at the date thereof and, in
particular, all Assets and all liabilities and obligations, due or accruing,
contingent or absolute, liquidated or unliquidated, of Oriental and Shanxi
Weiqida except for claims against third parties and insured claims not required
to be disclosed under GAAP.
23. Undisclosed Liabilities. Neither Oriental nor Shanxi Weiqida has any
liabilities, obligations, indebtedness or commitments, whether accrued,
absolute, contingent or otherwise, and none of them is a party to or bound by
any Contract of guarantee, support, indemnification, assumption or endorsement
of, or any other similar commitment with respect to the liabilities,
obligations, indebtedness or commitments (whether accrued, absolute, contingent
or otherwise) of any Person, that are not disclosed in the Oriental Financial
Statements or disclosed in the schedules or appendices to this Agreement, other
than liabilities, obligations, indebtedness and commitments in respect of trade
or business obligations incurred after the Financial Statement Date in the
Ordinary Course of their Business, that do not exceed U.S.$5,000 in the
aggregate and that are not Materially adverse to Oriental, Shanxi Weiqida or
their Business.
24. Accounts Receivable. All Accounts Receivable of Oriental and Shanxi Weiqida
are bona fide and good and have been incurred in the Ordinary Course of their
Business. Subject to an allowance for doubtful accounts that has been reflected
on the books of Oriental and Shanxi Weiqida in accordance with GAAP, all such
Accounts Receivable are collectible at their full face value in the Ordinary
Course of their Business without set-off or counterclaim. None of such Accounts
Receivable is due from an Affiliate or Associate of Oriental or Shanxi Weiqida,
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from any of the Vendors or an Affiliate or Associate of any of the Vendors or
any employee of Oriental, Shanxi Weiqida or an Affiliate or Associate of
Oriental or Shanxi Weiqida.
25. Intellectual Property.
(a) Appendix A-3-25 contains a complete and accurate list of the
Intellectual Property of Oriental and Shanxi Weiqida and of all Contracts
that comprise or relate to their Intellectual Property and sets out
complete and accurate particulars of all registrations or applications for
registration of their Intellectual Property.
(b) Except as set out in Appendix A-3-25, Oriental or Shanxi Weiqida is the
beneficial owner of their Intellectual Property, free and clear of all
Encumbrances, and is not a party to or bound by any Contract or other
obligation whatsoever that limits or impairs their ability to sell,
transfer, assign or convey, or that otherwise affects, their Intellectual
Property. No Person has been granted any interest in or right to use all or
any portion of the Intellectual Property of Oriental or Shanxi Weiqida.
(c) The Intellectual Property of Oriental and Shanxi Weiqida comprises all
patents (including utility patents, design patents, registered industrial
designs, utility models and certificates of addition), patent applications,
copyright, trade marks (including trade names, business names and service
marks), semiconductor topography rights, information rights in computer
software and databases and such similar instruments or rights which are
recognized in any jurisdiction, and all trade secrets and know-how and all
other industrial or intellectual property necessary to conduct the Business
of Oriental and Shanxi Weiqida. The conduct of the Business of Oriental and
Shanxi Weiqida does not infringe on the patents (including utility patents,
design patents, registered industrial designs, utility models and
certificates of addition), patent applications, copyright, trade marks
(including trade names, business names and service marks), semiconductor
topography rights, information rights in computer software and databases
and such similar instruments or rights which are recognized in any
jurisdiction or trade secrets of any other Person.
(d) Oriental and the Vendor
(i) do not have any knowledge of any infringement or breach of any
industrial or intellectual property rights of any other Person by
Oriental or Shanxi Weiqida,
(ii) have not received and do not have any knowledge of any notice
that the conduct of their Business, including the use of their
Intellectual Property, infringes on or breaches any industrial or
intellectual property rights of any other Person,
(iii) do not have any knowledge of any infringement or breach of the
rights of Oriental or Shanxi Weiqida in their Intellectual Property,
and
(iv) do not have any knowledge of any state of facts that casts doubt
on the validity or enforceability of any of their Intellectual
Property.
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26. Information Technology.
(a) The Information Technology of Oriental and Shanxi Weiqida adequately
meets the data processing needs of the Business, operations and affairs of
each of Oriental and Shanxi Weiqida, in each case as presently conducted
and as currently contemplated to be conducted, and Oriental and Shanxi
Weiqida have obtained all necessary rights to use their Information
Technology, as presently conducted and as currently contemplated to be
conducted, in accordance with all Applicable Laws and without violating the
Intellectual Property rights of any Person. Oriental and Shanxi Weiqida
have taken appropriate action by instruction, agreement or otherwise with
their employees or other Persons permitted access to system application
programs and data files used in their Information Technology to protect
against unauthorized access, use, copying, modification, theft and
destruction of those programs and files. The data processing and data
storage facilities of Oriental and Shanxi Weiqida are adequate and properly
protected. Oriental and Shanxi Weiqida have arranged for back-up data
processing services adequate to meet their data processing needs in the
event their Information Technology or any of their components is rendered
temporarily or permanently inoperative as a result of a natural or other
disaster.
(b) All licensed software which comprises any Material part of the
Information Technology of Oriental and Shanxi Weiqida is in
machine-readable form, contains current revisions of that software as
delivered to Oriental or Shanxi Weiqida by the licensors thereof and
includes all object codes, computer programs, magnetic media and
documentation which is used or required by Oriental or Shanxi Weiqida for
use in their Information Technology. To the extent that any software has
been built specifically for Oriental or Shanxi Weiqida and is a Material
part of their Information Technology, a copy of the source code is in
escrow for the benefit of Oriental or Shanxi Weiqida in the event of the
occurrence of certain triggering events and none of the licences for that
software will be adversely affected by a change of ownership of shares in
the capital of Oriental or Shanxi Weiqida or requires prior approval of any
transfer or assignment to remain in force or effect.
27. Absence of Changes. Since the Financial Statement Date, and except as
required by this Agreement or disclosed in any other schedule or appendix
hereto, each of Oriental and Shanxi Weiqida has carried on their Business and
conducted its operations and affairs only in the Ordinary Course and neither
Oriental nor Shanxi Weiqida has
(a) made or suffered any Material Adverse Change,
(b) suffered any damage, destruction or loss (whether or not covered by
insurance) affecting their Assets,
(c) incurred any liability, obligation, indebtedness or commitment (whether
accrued, absolute, contingent or otherwise, and whether due or to become
due), other than unsecured current liabilities, obligations, indebtedness
and commitments incurred in the Ordinary Course of their Business,
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(d) paid, discharged or satisfied any Encumbrance, liability, obligation,
indebtedness or commitment of Oriental or Shanxi Weiqida (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) other
than the Shanxi Weiqida Shareholder Loan and payment of accounts payable
and tax liabilities incurred in the Ordinary Course of their Business,
(e) declared, set aside or paid any dividend or made any other distribution
with respect to any of their shares, or redeemed, repurchased or otherwise
acquired, directly or indirectly, any such shares, except for any dividend
or other distribution that is contributed to the capital account of Shanxi
Weiqida as a registered capital contribution,
(f) issued or sold or entered into any Contract for the issuance or sale of
any shares in the capital of, or securities convertible into or exercisable
for shares in the capital of any of, Oriental or Shanxi Weiqida,
(g) suffered any labour trouble or disruption, including any strike or lock
out, that adversely affected them,
(h) made any sale, assignment, transfer or disposition or granted any
Encumbrance on, to or over any of their Assets, other than sales of
products to customers in the Ordinary Course of their Business,
(i) made any write-down of the value of any inventory or any write-off as
uncollectible of any of their Accounts Receivable or any portion thereof in
amounts exceeding $500,000 in the aggregate,
(j) cancelled any debts or Claims or made any amendment, termination or
waiver of any right of value to it in an amount exceeding $500,000 in the
aggregate,
(k) made any general increase in the compensation of its employees or any
increase in any such compensation or bonus payable to any of its officers,
employees, consultants or agents (having an annual salary or remuneration
in excess of $30,000), executed any employment agreement with any officer
or employee (having an annual salary or remuneration in excess of $30,000)
or made any loan to, or engaged in any transaction with, any of its
employees, officers or directors,
(l) made any capital expenditures or commitments in excess of $500,000 in
the aggregate, other than its commitments and expenditures in respect of
7-ACA and clavulanic acid projects,
(m) made any change in its accounting, costing, tax practices or
depreciation or amortization policies or rates, except for changes from
generally accepted accounting principles applicable in the People's
Republic of China to GAAP,
(n) terminated, cancelled or modified, in any Material respect, or received
any notice of a request for termination, cancellation or modification of,
in any Material respect, any Material Contract of Oriental or Shanxi
Weiqida, or
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(o) authorized or agreed to or otherwise committed to do any of the
foregoing.
28. Insurance Policies. The Assets of Oriental and Shanxi Weiqida are covered
by fire and other insurance with responsible insurers against such risks and in
such amounts as are reasonable for prudent owners of comparable Assets. Appendix
A-3-28 is a true, accurate and complete list of all insurance policies
maintained by Oriental and Shanxi Weiqida and:
(a) each such policy is in full force and effect without amendment or
variation,
(b) neither Oriental nor Shanxi Weiqida is in default with respect to any
of the provisions contained in any such insurance policy or has failed to
give any notice or present any claim under any such insurance policy in a
timely fashion,
(c) Oriental and Shanxi Weiqida have no reason to believe that any such
insurance policy will not be renewed by the insurer on the scheduled expiry
of the policy or will be renewed by the insurer only on the basis that
there will be a Material increase in premiums payable in respect of the
policy, and
(d) no other insurance is necessary to the conduct of the Business of
Oriental and Shanxi Weiqida or would be considered to be desirable by a
prudent Person operating a business similar to the Business of Oriental and
Shanxi Weiqida.
29. No Expropriation. None of the Assets of Oriental or Shanxi Weiqida have
been taken or expropriated by any Regulatory Authority nor has any notice or
proceeding in respect thereof been given or commenced and to the knowledge of
Oriental and Shanxi Weiqida, there is not any intent or proposal to give any
such notice or commence any such proceeding.
30. Material Contracts and Other Contracts. Except for the Contracts set out in
Appendix A-3-30 or disclosed in any other schedule or appendix to this
Agreement, neither Oriental nor Shanxi Weiqida is a party to or bound by
(a) any distributor, sales, advertising, agency or manufacturer's
representative or similar Contract,
(b) any continuing Contract for the purchase of materials, supplies,
equipment or services which involves payment under that agreement of more
than $250,000 in the aggregate, except for purchases of inventory in the
Ordinary Course of their Business on terms and conditions not more onerous
than those usual and customary to the industry relating to their Business,
(c) any written employment or consulting Contract or any other written
Contract with any officer, employee or consultant other than oral
agreements of indefinite hire terminable by the employer without cause on
reasonable notice,
(d) any trust indenture, mortgage, hypothec, promissory note, debenture,
loan agreement, guarantee or other Contract for the borrowing of money or a
leasing transaction of the type required to be capitalized in accordance
with GAAP,
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(e) any Contract of guarantee, support, indemnification, assumption or
endorsement of, or any other similar commitment with respect to, the
liabilities, obligations, indebtedness, or commitments (whether accrued,
absolute, contingent or otherwise) or indebtedness of any other Person
(except for cheques endorsed for collection),
(f) any Contract for charitable contributions or gifts of any of their
Assets, other than donations in the Ordinary Course of their Business,
(g) any Contract for capital expenditures in excess of $250,000 in the
aggregate,
(h) any Contract for the sale of any of their Assets or any part of their
Business, other than sales of inventory to customers in the Ordinary Course
of their Business,
(i) any confidentiality, secrecy or non-disclosure Contracts (whether
Oriental or Shanxi Weiqida is a beneficiary or obligor thereunder) relating
to any proprietary or confidential information that contains any
non-competition or similar agreement,
(j) any Material Contract,
(k) any Contract that expires, or may expire if it is not renewed or
extended at the option of any Person other than Oriental or Shanxi Weiqida,
as the case may be, more than one year after the date of this Agreement,
(l) any Contract which has, or could reasonably have, a Materially Adverse
Effect on their Business or any of their Assets or is or reasonably could
be Materially burdensome to Oriental or Shanxi Weiqida, and
(m) any Contract entered into by Oriental or Shanxi Weiqida other than in
the Ordinary Course of their Business.
31. No Default under Contracts. Each of Oriental and Shanxi Weiqida has
performed all of the Material obligations required to be performed by it and is
entitled to all benefits under, and is not in default or alleged to be in
default in respect of any Material provision, of any Contract relating to their
Business or their Assets (including agreements referred to in any schedule or
appendix to this Agreement), to which it is a party or by which it or their
Assets are bound or affected. All such Contracts are in good standing and in
full force and effect, and no event, condition or occurrence exists that, after
the lapse of time, giving of notice or both, would constitute a default under
any such Contract. There is no dispute between Oriental or Shanxi Weiqida, as
the case may be, and any other party under any such Contract. None of such
Contracts contain terms under which the execution or performance of this
Agreement would give any other contracting party the right to terminate or
adversely change the terms of such Contract or otherwise require the consent of
any other Person. None of such Contracts have been assigned, or if applicable
subleased, in whole or in part.
32. Real Property. Appendix A-3-32 contains accurate and complete descriptions
of all Real Property in respect of which Oriental or Shanxi Weiqida hold an
interest including land use rights, whether freehold, leasehold or otherwise,
and
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(a) other than with respect to leasehold interests disclosed in such
appendix, such company has good and marketable title to all of its Real
Property including Real Property acquired since the Financial Statement
Date (except as since transferred, sold or otherwise disposed of in the
ordinary and normal course of its Business), free and clear of Encumbrances
of any kind or character and none of such Real Property is in the
possession of or under the control of any other Person,
(b) neither Oriental nor Shanxi Weiqida is a party to, or bound by, any
Real Property Leases other than those referred to in such appendix,
(c) all Real Property Lease and other payments required to be paid by
Oriental or Shanxi Weiqida pursuant to such Real Property Leases have been
duly paid and such company is not otherwise in default in meeting its
Material obligations under any such Real Property Leases,
(d) Land Use Right No. 1 was duly transferred from Domestic Shanxi Weiqida
to Shanxi Weiqida with all required Approvals obtained and all applicable
Taxes paid and in accordance with all Applicable Law, and there are no
outstanding rights, obligations or Claims of any Person with respect to
such transfer, and
(e) all buildings, structures and permanent fixtures with respect to or
located on Real Property of Oriental or Shanxi Weiqida are owned by
Oriental or Shanxi Weiqida, as applicable, free and clear of all
Encumbrances and all such buildings, structures and permanent fixtures have
been erected in accordance with all Applicable Laws and all required
Approvals in respect thereof have been obtained.
33. Personal Property. Appendix A-3-33 contains an accurate and complete list
of all Personal Property in respect of which Oriental or Shanxi Weiqida hold an
interest, whether freehold, leasehold or otherwise, that is Material to its
Business or its Assets and has a book value of $24,000 or more and
(a) other than with respect to leasehold interests disclosed in such
appendix, such company has good and marketable title to all of its Personal
Property and interests in Personal Property including Personal Property
acquired since the Financial Statement Date (except as since transferred,
sold or otherwise disposed of in the ordinary and normal course of their
Business), free and clear of Encumbrances of any kind or character and none
of such company's Personal Property is in the possession of or under the
control of any other Person,
(b) neither Oriental nor Shanxi Weiqida is a party to, or bound by, any
Personal Property Leases other than those referred to in such appendix, and
(c) all Personal Property Lease and other payments required to be paid by
Oriental and Shanxi Weiqida pursuant to such Personal Property Leases have
been duly paid and such company is not otherwise in default in meeting its
Material obligations under any such Personal Property Leases.
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34. Non-Arm's Length Transactions. To the knowledge of Oriental and each Vendor,
except for the Shanxi Weiqida Shareholder Loan or as otherwise disclosed in this
Agreement or any schedule or appendix hereto, no officer, director, Affiliate or
Associate of Oriental or Shanxi Weiqida and no Vendor or Affiliate or Associate
of a Vendor, has now or has had since the Financial Statement Date, directly or
indirectly
(a) a financial or profit interest in any entity that purchases from or
sells or furnishes to Oriental or Shanxi Weiqida, any goods or services, or
(b) a beneficial interest in any Contract pursuant to which payment of a
financial, economic or other benefit has been or will be made by Oriental
or Shanxi Weiqida.
35. Employees. With respect to each Person employed or engaged in their
Business by Oriental or Shanxi Weiqida, including Persons seconded to other
entities,
(a) each such employee has entered into an employment agreement with
Oriental or Shanxi Weiqida, as applicable, the terms of which have been
disclosed to Dragon, and there is no other contract of employment, either
of service or for service entered into by Oriental or Shanxi Weiqida with
any other Person, and such company is not in default and, to the best
knowledge of Oriental and the Vendor, no such employee is in default under
any of the provisions thereof,
(b) each such employee has been paid all wages, income and other amounts
due and owing to the employee by Oriental or Shanxi Weiqida, as applicable,
as at the end of the most recently completed pay period,
(c) all Taxes, social insurance payments and other payments due and owing
in respect of each such employee as at the end of the most recently
completed pay period have been withheld and paid in accordance with all
Applicable Law, and
(d) neither Oriental or the Vendor is aware of any labour conflict with any
of such employees that might reasonably be expected to have a Materially
adverse effect on the Business of Oriental or Shanxi Weiqida.
36. Predecessor Liabilities. Except as otherwise disclosed in this Agreement or
any schedule or appendix hereto, neither Oriental nor Shanxi Weiqida have any
successorship liabilities whatsoever related to any predecessor entities of
Oriental or Shanxi Weiqida or any Assets acquired by Oriental or Shanxi Weiqida.
37. Competition Act. To the knowledge of each Vendor and Oriental, the
transactions contemplated by this Agreement and the completion of the Closing
will not breach any applicable competition, unfair trade practice or similar law
or regulation.
38. No Finder's Fees. None of the Vendors, Oriental or Shanxi Weiqida have
engaged the services of any finder, agent, broker or other Person for the
purchase of the Dragon Closing Shares or the sale of the Vendors' Shares and
none of the Vendors and neither of Oriental and Shanxi Weiqida, has taken nor
will take any action that would cause Dragon to become liable to any Claim for a
brokerage commission, finder's fee or other similar arrangement.
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39. Taxes. There have been no assessments or orders issued or, to the knowledge
of Oriental or each Vendor, threatened, and no investigations, proceedings or
actions conducted, taken or, to the knowledge of Oriental or each Vendor,
threatened, under or pursuant to any Tax Law with respect to Taxes against
Oriental, Shanxi Weiqida or any of their Assets or their Business. The carrying
on of their Business and use of their Assets by Oriental and Shanxi Weiqida has
been and is in compliance in all Material respects with all Tax Laws, each of
Oriental and Shanxi Weiqida have obtained all Approvals required, and paid all
Taxes due and payable, by such company under all Tax Laws and neither Oriental
nor each Vendor are aware of any facts which could give rise to a notice of
non-compliance by Oriental or Shanxi Weiqida under any Tax Laws.
40. Environmental Liabilities. There have been no orders issued or, to the
knowledge of Oriental or each Vendor, threatened, and no investigations,
proceedings or actions conducted, taken or, to the knowledge of Oriental or each
Vendor, threatened, under or pursuant to any Environmental Protection Laws with
respect to Oriental, Shanxi Weiqida or any of their Assets or their Business.
41. Environmental Compliance. The use of their Assets by Oriental and Shanxi
Weiqida has been and is in compliance in all Material respects with all
Environmental Protection Laws and neither Oriental nor any Vendor are aware of
any facts which could give rise to a notice of non-compliance under any
Environmental Protection Laws with respect to such use.
42. Release of Hazardous Materials. Oriental and Shanxi Weiqida have not caused
or permitted the release of any Hazardous Materials on or off-site of any of
their Real Property, except in compliance with all applicable Environmental
Protection Laws.
43. Treatment and Storage of Hazardous Materials. All wastes and other
materials and substances disposed of, treated or stored on the Real Property of
Oriental or Shanxi Weiqida, whether Hazardous Materials or not, have been
disposed of, treated and stored in Material compliance with all applicable
Environmental Protection Laws.
44. Specific Substances. None of the Real Property of Oriental or Shanxi
Weiqida contain asbestos in any form, ureaformaldehyde, polychlorinated
biphenyls or products treated with polychlorinated biphenyls, radioactive
substances garbage or industrial waste or any underground storage tank.
45. Migration of Hazardous Materials. No Hazardous Material has passed onto
adjoining lands from any Real Property of Oriental or Shanxi Weiqida.
46. Regulatory Compliance. Oriental and Shanxi Weiqida have acquired and
currently hold, all Material Approvals granted by or entered into with any
Regulatory Authority required in connection with their Assets and Business and
all of such Approvals held by Oriental or Subsidiary are in good standing and
are being complied with in all Material respects.
47. Compliance with Laws. Oriental and Shanxi Weiqida have, in all Material
respects, conducted their Business in compliance with all Applicable Law and are
not in unremedied breach, and have not received any notification alleging that
they are in breach, of any Applicable Law.
48. Validity. All of the foregoing representations and warranties of Oriental
and the Vendor will be true and correct on the Closing Date as if made on that
date.
PART 4 Representations and Warranties of Dragon
1. Dragon Status. Dragon is duly incorporated and organized, and is validly
existing under the laws of Florida and is in good standing with respect to the
filing of annual reports with the Florida Department of State. Dragon carries on
its Business only in Canada and the People's Republic of China, and has made all
filings and holds all registrations, licensing and other qualifications to carry
on its Business in such jurisdictions.
2. Subsidiaries of Dragon. Except for the Dragon Subsidiaries and as provided
in this Agreement, Dragon has not owned, does not own and does not have any
Contract to acquire, directly or indirectly, any Equity Interest in, or any
proprietary interest in the Assets or Business of, any other Person.
3. Ownership of Subsidiaries. Dragon, directly or indirectly through the
Dragon Subsidiaries, owns and has good and marketable title to the entire Equity
Interest in Dragon Pharmaceuticals (Canada) Inc., Allwin Newtech Ltd., Allwin
Biotrade Ltd. and Nanjing Huaxin Bio-pharmaceutical Co., Ltd. and 95% of the
Equity Interest in Sanhe Kailong Biopharmaceutical Co., Ltd. as the legal and
beneficial owner free and clear of all Claims and Encumbrances.
4. Status of Subsidiaries. The Dragon Subsidiaries are duly incorporated and
organized, and are validly subsisting, under the laws of their respective
jurisdictions of incorporation and are up-to-date in the filing of all corporate
and similar returns under the laws of such jurisdictions. The Dragon
Subsidiaries have made all filings and hold all registrations, licensing and
other qualifications to carry on their Business in the jurisdictions in which
they carry on their respective Business.
5. Corporate Power and Capacity. Each of Dragon and the Dragon Subsidiaries
has the corporate power and corporate capacity to carry on its Business and to
own its Assets and Dragon has the corporate power and corporate capacity to
enter into this Agreement and perform its obligations hereunder.
6. Share Capital of Dragon. The authorized capital of Dragon consists of
50,000,000 shares of which [20,434,000] shares are issued and outstanding. Each
of the issued and outstanding shares of Dragon has been duly and validly issued
and is outstanding as a fully paid and non-assessable share in the capital of
Dragon.
7. Issuance of Dragon Closing Shares. At the time of the Closing, all
necessary corporate action will have been taken by Dragon validly to issue the
Dragon Closing Shares to the Vendors as fully paid and non-assessable shares in
the capital of Dragon.
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8. Rights to Purchase Dragon Shares. Except as provided in this Agreement, no
Person has any right or Contract, present or future, contingent or absolute, or
any right capable of becoming a right or Contract, for the acquisition of any
Equity Interest in Dragon.
9. Directors and Officers. The directors and officers of Dragon are as
follows:
Directors: Xxxxxxxxx Xxxx
Longbin Xxx
Xxx X. Xxx
Xxxxxx Xxxx Xxx Xxx
Xxx Xxxxx Sun
Officers: Xxxxxxxxx Xxxx -President and Chief Executive Officer
Xxxxx Xxxxxx - Vice-President, Marketing
Xxxxxx Xxxxx - Director, Corporate Development
Xxxxxxx Xxxxxxxx - Director, Finance and Compliance
10. Rights to Purchase Dragon Subsidiary Shares. Except for Dragon and the
Dragon Subsidiaries, no Person has any right or Contract, present or future,
contingent or absolute, or any right capable of becoming a right or Contract, to
make any capital contribution, or for the acquisition of any Equity Interest, in
a Dragon Subsidiary.
11. Enforceability. This Agreement and all other Contracts and instruments to
be executed and delivered by Dragon pursuant to this Agreement have been duly
authorized, executed and delivered by Dragon and constitute legal, valid and
binding obligations of Dragon and are enforceable against Dragon in accordance
with their terms, except to the extent that
(a) the availability of equitable remedies is subject to the discretion of
applicable judicial authority,
(b) enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to
the rights of creditors generally, and
(c) rights to indemnity and the ability to sever unenforceable terms may
be limited by applicable law.
12. Consents. Except as expressly set out in this Agreement, no Approval of any
Person, and no registration, declaration or filing by Dragon or a Dragon
Subsidiary with any Person is required, other than filings that are required to
be made with the TSX, SEC and the OTCBB, in order for Dragon to,
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(a) incur its obligations pursuant to this Agreement,
(b) execute and deliver this Agreement and all other documents and
instruments to be delivered by it pursuant to this Agreement,
(c) duly perform and observe the terms and provisions of this Agreement
and any other Contract or instruments to be entered into pursuant to this
Agreement, and
(d) render this Agreement legal, valid, binding and enforceable on it.
13. No Conflict. Except as expressly set out in this Agreement, the execution,
delivery and performance by Dragon of this Agreement and the completion of the
Closing will not (whether after the lapse of time, giving of notice or both),
result in
(a) the breach or violation of any provisions of, or constitute a default
under, or conflict with or cause acceleration of any obligation of Dragon
or a Dragon Subsidiary, under
(i) any Contract to which Dragon or a Dragon Subsidiary is a party or
by which any of their undertakings or Assets are bound or affected,
(ii) any provision of their constating documents, by-laws, articles or
resolutions of their board of directors (or any committee thereof) or
shareholders,
(iii) any Approval issued to, held by or for the benefit of, Dragon or
a Dragon Subsidiary, (iv) any judgment, decree, order or award of any
court, Regulatory Authority or arbitrator having jurisdiction over
Dragon or a Dragon Subsidiary, or
(v) any Applicable Law,
(b) the creation of any Encumbrance upon any of the Assets of Dragon or a
Dragon Subsidiary; or
(c) the requirement of any Approval from any of the creditors of Dragon or
a Dragon Subsidiary.
14. No Claims. There are no Claims (whether or not on behalf of Dragon or a
Dragon Subsidiary) pending or outstanding or, to Dragon's knowledge, threatened
against Dragon or a Dragon Subsidiary which could reasonably be expected to
adversely affect any of the Dragon Closing Shares or Dragon's ability to perform
its obligations under this Agreement or to have a Material Adverse Effect on
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Dragon or a Dragon Subsidiary. To Dragon's knowledge there is not any factual or
legal basis on which any such bona fide Claim might reasonably be expected to be
commenced.
15. Solvency. Neither Dragon nor any of the Dragon Subsidiaries is an insolvent
Person within the meaning of the Bankruptcy and Insolvency Act (Canada) or any
other similar legislation in any jurisdiction and none of them has made an
assignment in favour of, or a proposal in bankruptcy to, its creditors or any
class thereof, and no petition for a receiving order has been presented in
respect of Dragon or a Dragon Subsidiary. Neither Dragon nor any of the Dragon
Subsidiaries has initiated proceedings with respect to a compromise or
arrangement with its creditors or for its winding up, liquidation or
dissolution. No receiver or interim receiver has been appointed in respect of
Dragon or a Dragon Subsidiary or any of their Assets and no execution or
distress has been levied on any of their Assets, nor have any proceedings been
commenced in connection with any of the foregoing.
16. No Undisclosed Information. Dragon has no information or knowledge of any
fact or circumstance which adversely affects its ability to complete the
transactions contemplated in this Agreement and neither this Agreement nor any
other document or certificate furnished to the Vendors by Dragon in connection
with such transaction contains any Material error or omission or untrue,
misleading or incomplete statement of Material fact.
17. Conduct of Business. Except as expressly permitted pursuant to this
Agreement, Dragon and the Dragon Subsidiaries have not, since April 4, 2004,
directly or indirectly sold any of their Assets or entered into any Contract or
transaction that will affect their Business other than in the Ordinary Course of
their Business. Dragon and the Dragon Subsidiaries have complied with, and have
conducted and are conducting their Business in compliance in all Material
respects with, all Applicable Law. The Assets of Dragon and the Dragon
Subsidiaries are sufficient to permit the continued operation of their Business
from and after the Closing Date in substantially the same manner as conducted in
the one-year period immediately preceding the date of this Agreement.
18. Corporate Records. The corporate records of Dragon and the Dragon
Subsidiaries contain complete and accurate records of all resolutions passed by
such companies' shareholders and directors since the date of such companies'
incorporation and all other matters required to be recorded therein under the
laws of their respective jurisdictions of incorporation and Business. All
Material transactions affecting Dragon and the Dragon Subsidiaries have been
properly recorded or filed in their respective corporate and other record books.
The registers, including the securities registers and registers of directors and
officers, of Dragon and the Dragon Subsidiaries are complete and accurate and
will, on the Closing Date, reflect all transactions contemplated by this
Agreement.
19. Financial Records. The system of internal accounting controls is sufficient
to provide reasonable assurances that all Material transactions affecting Dragon
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and the Dragon Subsidiaries are executed in accordance with management's general
or specific authorization and that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain accountability for Assets.
20. Financial Statements. Each of the Dragon Financial Statements and the
unaudited consolidated financial statements of Dragon for the three-month period
ended March 31, 2004 are true, correct and complete in every Material respect,
have been prepared in accordance with GAAP applied on a basis consistent with
the financial statements for the same period of time in the prior year unless
otherwise specifically stated in any such financial statements, and fairly and
accurately reflect in every Material way the financial position of Dragon and
the Dragon Subsidiaries as at the date thereof and the results of the operations
and the changes in cash resources of Dragon and the Dragon Subsidiaries for the
period then ended.
21. Undisclosed Liabilities. Dragon and the Dragon Subsidiaries do not have any
liabilities, obligations, indebtedness or commitments, whether accrued,
absolute, contingent or otherwise, and none of them is a party to or bound by
any Contract of guarantee, support, indemnification, assumption or endorsement
of, or any other similar commitment with respect to the liabilities,
obligations, indebtedness or commitments (whether accrued, absolute, contingent
or otherwise) of any Person, that are not disclosed in the Dragon Financial
Statements or disclosed in the schedules or appendices to this Agreement, other
than liabilities, obligations, indebtedness and commitments in respect of trade
or business obligations incurred after the Financial Statement Date in the
Ordinary Course of their Business, that do not exceed U.S.$5,000 in the
aggregate and that are not Materially adverse to Dragon, the Dragon Subsidiaries
or their Business.
22. Accounts Receivable. All Accounts Receivable of Dragon and the Dragon
Subsidiaries are bona fide and good and have been incurred in the Ordinary
Course of their Business. Subject to an allowance for doubtful accounts that has
been reflected on the books of Dragon and the Dragon Subsidiaries in accordance
with GAAP, all such Accounts Receivable are collectible at their full face value
in the Ordinary Course of their Business without set-off or counterclaim. None
of such Accounts Receivable is due from an Affiliate or Associate of Dragon or a
Dragon Subsidiary or any employee of Dragon, a Dragon Subsidiary or an Affiliate
or Associate of Dragon or a Dragon Subsidiary.
23. Intellectual Property.
(a) Appendix A-4-23 contains a complete and accurate list of the
Intellectual Property of Dragon and the Dragon Subsidiaries and of all
Contracts that comprise or relate to their Intellectual Property and sets
out complete and accurate particulars of all registrations or applications
for registration of their Intellectual Property.
(b) Except as set out in Appendix A-4-23, Dragon and the Dragon
Subsidiaries are the beneficial owners of their respective Intellectual
-6-
Property, free and clear of all Encumbrances, and are not parties to or
bound by any Contract or other obligation whatsoever that limits or impairs
their ability to sell, transfer, assign or convey, or that otherwise
affects, their Intellectual Property. No Person has been granted any
interest in or right to use all or any portion of the Intellectual Property
of Dragon or the Dragon Subsidiaries.
(c) The Intellectual Property of Dragon and the Dragon Subsidiaries
comprises all patents (including utility patents, design patents,
registered industrial designs, utility models and certificates of
addition), patent applications, copyright, trade marks (including trade
names, business names and service marks), semiconductor topography rights,
information rights in computer software and databases and such similar
instruments or rights which are recognized in any jurisdiction, and all
trade secrets and know-how and all other industrial or intellectual
property necessary to conduct the Business of Dragon and the Dragon
Subsidiaries. The conduct of the Business of Dragon and the Dragon
Subsidiaries does not infringe on the patents (including utility patents,
design patents, registered industrial designs, utility models and
certificates of addition), patent applications, copyright, trade marks
(including trade names, business names and service marks), semiconductor
topography rights, information rights in computer software and databases
and such similar instruments or rights which are recognized in any
jurisdiction or trade secrets of any other Person.
(d) Dragon
(i) does not have any knowledge of any infringement or breach of any
industrial or intellectual property rights of any other Person by
Dragon or a Dragon Subsidiary,
(ii) has not received and does not have any knowledge of any notice
that the conduct of their Business, including the use of their
Intellectual Property, infringes on or breaches any industrial or
intellectual property rights of any other Person,
(iii) does not have any knowledge of any infringement or breach of the
rights of Dragon or the Dragon Subsidiaries in their Intellectual
Property, and
(iv) does not have any knowledge of any state of facts that casts
doubt on the validity or enforceability of any of their Intellectual
Property.
24. Information Technology.
(a) The Information Technology of Dragon and the Dragon Subsidiaries
adequately meets the data processing needs of the Business, operations and
affairs of each of Dragon and the Dragon Subsidiaries, in each case as
presently conducted and as currently contemplated to be conducted. Dragon
-7-
and the Dragon Subsidiaries have taken appropriate action by instruction,
agreement or otherwise with their employees or other Persons permitted
access to system application programs and data files used in their
Information Technology to protect against unauthorized access, use,
copying, modification, theft and destruction of those programs and files.
The data processing and data storage facilities of Dragon and the Dragon
Subsidiaries are adequate and properly protected. Dragon and the Dragon
Subsidiaries have arranged for back-up data processing services adequate to
meet their data processing needs in the event their Information Technology
or any of their components is rendered temporarily or permanently
inoperative as a result of a natural or other disaster.
(b) All licensed software which comprises any Material part of the
Information Technology of Dragon or a Dragon Subsidiary is in
machine-readable form, contains current revisions of that software as
delivered to Dragon or the Dragon Subsidiary by the licensors thereof and
includes all object codes, computer programs, magnetic media and
documentation which is used or required by Dragon or the Dragon Subsidiary
for use in its Information Technology. To the extent that any software has
been built specifically for Dragon or a Dragon Subsidiary and is a Material
part of its Information Technology, a copy of the source code is in escrow
for the benefit of Dragon or the Dragon Subsidiary in the event of the
occurrence of certain triggering events and none of the licences for that
software will be adversely affected by a change of ownership of shares in
the capital of Dragon or the Dragon Subsidiary or requires prior approval
of any transfer or assignment to remain in force or effect.
25. Absence of Changes. Except as set out in Appendix A-4-25, since the
Financial Statement Date, and except as required by this Agreement or disclosed
in any other schedule or appendix hereto, Dragon and the Dragon Subsidiaries
have carried on their Business and conducted their operations and affairs only
in the Ordinary Course and neither Dragon nor any of the Dragon Subsidiaries has
(a) made or suffered any Material Adverse Change,
(b) suffered any damage, destruction or loss (whether or not covered by
insurance) affecting their Assets,
(c) incurred any liability, obligation, indebtedness or commitment (whether
accrued, absolute, contingent or otherwise, and whether due or to become
due), other than unsecured current liabilities, obligations, indebtedness
and commitments incurred in the Ordinary Course,
(d) paid, discharged or satisfied any Encumbrance, liability, obligation,
indebtedness or commitment of Dragon or a Dragon Subsidiary (whether
accrued, absolute, contingent or otherwise, and whether due or to become
due) other than payment of accounts payable and tax liabilities incurred in
the Ordinary Course of its Business,
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(e) declared, set aside or paid any dividend or made any other distribution
with respect to any of their shares, or redeemed, repurchased or otherwise
acquired, directly or indirectly, any such shares,
(f) issued or sold or entered into any Contract for the issuance or sale of
any of their shares, or securities convertible into or exercisable for
shares in the capital of any of, Dragon or a Dragon Subsidiary, except for
the issuance or sale of shares or securities issued pursuant to existing
share option plans or agreements,
(g) suffered any labour trouble or disruption, including any strike or lock
out, that adversely affected them,
(h) made any sale, assignment, transfer or disposition or granted any
Encumbrance on, to or over any of their Assets, other than sales of
products to customers in the Ordinary Course of their Business,
(i) made any write-down of the value of any inventory or any write-off as
uncollectible of any of their Accounts Receivable or any portion thereof in
amounts exceeding $100,000 in the aggregate,
(j) cancelled any debts or Claims or made any amendment, termination or
waiver of any right of value to it in an amount exceeding $100,000 in the
aggregate,
(k) made any general increase in the compensation of its employees or any
increase in any such compensation or bonus payable to any of its officers,
employees, consultants or agents (having an annual salary or remuneration
in excess of $30,000), executed any employment agreement with any officer
or employee (having an annual salary or remuneration in excess of $30,000)
or made any loan to, or engaged in any transaction with, any of its
employees, officers or directors,
(l) made any capital expenditures or commitments in excess of $100,000 in
the aggregate,
(m) made any change in its accounting, costing, tax practices or
depreciation or amortization policies or rates,
(n) terminated, cancelled or modified, in any Material respect, or received
any notice of a request for termination, cancellation or modification of,
in any Material respect, any Material Contract of Dragon or a Dragon
Subsidiary, or
(o) authorized or agreed to or otherwise committed to do any of the
foregoing.
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26. Insurance Policies. The Assets of Dragon and the Dragon Subsidiaries are
covered by fire and other insurance with responsible insurers against such risks
and in such amounts as are reasonable for prudent owners of comparable Assets.
Appendix A-4-26 is a true, accurate and complete list of all insurance policies
maintained by Dragon and the Dragon Subsidiaries and:
(a) each such policy is in full force and effect without amendment or
variation,
(b) neither Dragon nor the Dragon Subsidiaries are in default with respect
to any of the provisions contained in any such insurance policy or have
failed to give any notice or present any claim under any such insurance
policy in a timely fashion,
(c) Dragon and the Dragon Subsidiaries have no reason to believe that any
such insurance policy will not be renewed by the insurer on the scheduled
expiry of the policy or will be renewed by the insurer only on the basis
that there will be a Material increase in premiums payable in respect of
the policy, and
(d) no other insurance is necessary to the conduct of the Business of
Dragon and the Dragon Subsidiaries or would be considered to be desirable
by a prudent Person operating a business similar to the Business of Dragon
and the Dragon Subsidiaries.
27. No Expropriation. None of the Assets of Dragon or the Dragon Subsidiaries
have been taken or expropriated by any Regulatory Authority nor has any notice
or proceeding in respect thereof been given or commenced and to the knowledge of
Dragon, there is not any intent or proposal to give any such notice or commence
any such proceeding.
28. Material Contracts and Other Contracts. Except for the Contracts set out in
Appendix A-4-28 or disclosed in any other schedule or appendix to this
Agreement, none of Dragon and the Dragon Subsidiaries are a party to or bound by
(a) any distributor, sales, advertising, agency or manufacturer's
representative or similar Contract,
(b) any continuing Contract for the purchase of materials, supplies,
equipment or services which involves payment under that agreement of more
than $100,000 in the aggregate, except for purchases of inventory in the
Ordinary Course of its Business on terms and conditions not more onerous
than those usual and customary to the industry relating to its Business,
(c) any written employment or consulting Contract or any other written
Contract with any officer, employee or consultant other than standard or
oral agreements of indefinite hire terminable by the employer without cause
on reasonable notice,
-10-
(d) any trust indenture, mortgage, hypothec, promissory note, debenture,
loan agreement, guarantee or other Contract for the borrowing of money or a
leasing transaction of the type required to be capitalized in accordance
with GAAP,
(e) any Contract of guarantee, support, indemnification, assumption or
endorsement of, or any other similar commitment with respect to, the
liabilities, obligations, indebtedness, or commitments (whether accrued,
absolute, contingent or otherwise) or indebtedness of any other Person
(except for cheques endorsed for collection),
(f) any Contract for charitable contributions or gifts of any of its
Assets, other than donations in the Ordinary Course of its Business,
(g) any Contract for capital expenditures in excess of $100,000 in the
aggregate,
(h) any Contract for the sale of any of its Assets or any part of its
Business, other than sales of inventory to customers in the Ordinary Course
of its Business,
(i) any confidentiality, secrecy or non-disclosure Contracts (whether
Dragon or a Dragon Subsidiary is a beneficiary or obligor thereunder)
relating to any proprietary or confidential information that contains any
non-competition or similar agreement,
(j) any Material Contract,
(k) any Contract that expires, or may expire if it is not renewed or
extended at the option of any Person other than Dragon or a Dragon
Subsidiary, as the case may be, more than one year after the date of this
Agreement,
(l) any Contract which has, or could reasonably have, a Materially Adverse
Effect on its Business or any of its Assets or is or reasonably could be
Materially burdensome to Dragon or a Dragon Subsidiary, and
(m) any Contract entered into by Dragon or a Dragon Subsidiary other than
in the Ordinary Course of its Business.
29. No Default under Contracts. Each of Dragon and the Dragon Subsidiaries has
performed all of the Material obligations required to be performed by it and is
entitled to all benefits under, and is not in default or alleged to be in
default in respect of any Material provision, of any Contract relating to its
Business or Assets (including agreements referred to in any schedule or appendix
to this Agreement), to which it is a party or by which it or its Assets are
bound or affected. All such Contracts are in good standing and in full force and
effect, and no event, condition or occurrence exists that, after the lapse of
time, giving of notice or both, would constitute a default under any such
Contract. There is no dispute between Dragon or any of the Dragon Subsidiaries
and any other party under any such Contract. None of such Contracts contain
-11-
terms under which the execution or performance of this Agreement would give any
other contracting party the right to terminate or adversely change the terms of
such Contract or otherwise require the consent of any other Person. None of such
Contracts have been assigned, or if applicable subleased, in whole or in part.
30. Real Property. Appendix A-4-30 contains accurate and complete descriptions
of all Real Property in respect of which Dragon or any of the Dragon
Subsidiaries holds an interest, whether freehold, leasehold or otherwise, and
(a) other than with respect to leasehold interests disclosed in such
appendix, such company has good and marketable title to all of its Real
Property including Real Property acquired since the Financial Statement
Date (except as since transferred, sold or otherwise disposed of in the
ordinary and normal course of its Business), free and clear of Encumbrances
of any kind or character and none of such Real Property is in the
possession of or under the control of any other Person,
(b) neither Dragon nor any of the Dragon Subsidiaries is a party to, or
bound by, any Real Property Leases other than those referred to in such
appendix,
(c) all Real Property Lease and other payments required to be paid by
Dragon or a Dragon Subsidiary pursuant to such Real Property Leases have
been duly paid and such company is not otherwise in default in meeting its
Material obligations under any such Real Property Lease, and
(d) all buildings, structures and permanent fixtures with respect to or
located on Real Property in respect of which Dragon or a Dragon Subsidiary
owns a freehold interest are owned by Dragon or the Dragon Subsidiary, as
applicable, free and clear of all Encumbrances and to the knowledge of
Dragon all such buildings, structures and permanent fixtures have been
erected in accordance with all Applicable Laws and all required Approvals
in respect thereof have been obtained.
31. Personal Property. Appendix A-4-31 contains an accurate and complete list
of all Personal Property in respect of which Dragon or a Dragon Subsidiary holds
an interest, whether freehold, leasehold or otherwise, that is Material to its
Business or its Assets and has a book value of $24,000 or more and
(a) other than with respect to leasehold interests disclosed in such
appendix, Dragon and the Dragon Subsidiaries have good and marketable title
to all of their Personal Property and interests in Personal Property
including Personal Property acquired since the Financial Statement Date
(except as since transferred, sold or otherwise disposed of in the ordinary
and normal course of their Business), free and clear of Encumbrances of any
kind or character and none of Dragon's or the Dragon Subsidiaries' Personal
Property is in the possession of or under the control of any other Person,
-12-
(b) Dragon and the Dragon Subsidiaries are not parties to, or bound by,
any Personal Property Leases other than those referred to in such appendix,
and
(c) all Personal Property Lease and other payments required to be paid by
Dragon or a Dragon Subsidiary pursuant to such Personal Property Leases
have been duly paid and Dragon and the Dragon Subsidiaries are not
otherwise in default in meeting their Material obligations under any such
Personal Property Leases.
32. Non-Arm's Length Transactions. To the knowledge of Dragon, except as
otherwise disclosed in this Agreement or any schedule or appendix hereto, no
officer, director, Affiliate or Associate of Dragon or a Dragon Subsidiary, has
or has had since the Financial Statement Date, directly or indirectly
(a) a financial or profit interest in any entity that purchases from or
sells or furnishes to Dragon or a Dragon Subsidiary, any goods or services,
or
(b) a beneficial interest in any Contract pursuant to which payment of a
financial, economic or other benefit has been or will be made by Dragon or
a Dragon Subsidiary.
33. Employees. With respect to each Person employed or engaged in their
respective Business by Dragon or a Dragon Subsidiary,
(a) each such employee has entered into an employment agreement with Dragon
or a Dragon Subsidiary the terms of which have been disclosed to the
Vendors, and there is no other contract of employment, either of service or
for service entered into by Dragon or a Dragon Subsidiary with any other
Person, and Dragon and the Dragon Subsidiaries are not in default and, to
the best knowledge of Dragon, no such employee is in default under any of
the provisions thereof,
(b) each such employee has been paid all wages, income and other amounts
due and owing to the employee by Dragon or a Dragon Subsidiary, as
applicable, as at the end of the most recently completed pay period,
(c) all Taxes, social insurance payments and other payments due and owing
in respect of each such employee as at the end of the most recently
completed pay period have been withheld and paid in accordance with all
Applicable Law, and
(d) Dragon is not aware of any labour conflict with any of such employees
that might reasonably be expected to have a Materially adverse effect on
the Business of Dragon or a Dragon Subsidiary.
34. Predecessor Liabilities. Except as otherwise disclosed in this Agreement or
any schedule or appendix hereto, Dragon and the Dragon Subsidiaries do not have
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any successorship liabilities whatsoever related to any predecessor entities of
Dragon or a Dragon Subsidiary or any Assets acquired by Dragon or a Dragon
Subsidiary.
35. Competition Act. To the knowledge of Dragon, the transactions contemplated
by this Agreement and the completion of the Closing will not breach any
applicable competition, unfair trade practice or similar law or regulation.
36. No Finder's Fees. Dragon has not engaged the services of any finder, agent,
broker or other Person for the purchase of the Vendors' Shares or the issuance
of the Dragon Closing Shares pursuant to this Agreement and Dragon has not taken
nor will take any action that would cause the Vendors, Oriental or Shanxi
Weiqida to become liable to any Claim for a brokerage commission, finder's fee
or other similar arrangement.
37. Taxes. There have been no assessments or orders issued or, to the knowledge
of Dragon, threatened, and no investigations, proceedings or actions conducted,
taken or, to the knowledge of Dragon, threatened, under or pursuant to any Tax
Law with respect to Taxes against Dragon or a Dragon Subsidiary or any of its
Assets or its Business. The carrying on of their Business and use of their
Assets by Dragon and the Dragon Subsidiaries has been and is in compliance in
all Material respects with all Tax Laws, Dragon and the Dragon Subsidiaries have
obtained all Approvals required, and paid all Taxes due and payable, by them
under all applicable Tax Laws and Dragon is not aware of any facts which could
give rise to a notice of non-compliance by Dragon under any Tax Laws.
38. Environmental Liabilities. There have been no orders issued or, to the
knowledge of Dragon, threatened, and no investigations, proceedings or actions
conducted, taken or, to the knowledge of Dragon, threatened, under or pursuant
to any Environmental Protection Laws with respect to Dragon or a Dragon
Subsidiary or any of its Assets or its Business.
39. Environmental Compliance. The use of their Assets by Dragon and the Dragon
Subsidiaries has been and is in compliance in all Material respects with all
Environmental Protection Laws and Dragon is not aware of any facts which could
give rise to a notice of non-compliance under any Environmental Protection Laws
with respect to such use.
40. Release of Hazardous Materials. Dragon and the Dragon Subsidiaries have not
caused or permitted the release of any Hazardous Materials on or off-site of any
of their Real Property, except in compliance with all applicable Environmental
Protection Laws.
41. Treatment and Storage of Hazardous Materials. All wastes and other
materials and substances disposed of, treated or stored on the Real Property of
Dragon and the Dragon Subsidiaries, whether Hazardous Materials or not, have
been disposed of, treated and stored in Material compliance with all applicable
Environmental Protection Laws.
-14-
42. Specific Substances. None of the Real Property of Dragon or the Dragon
Subsidiaries contains asbestos in any form, ureaformaldehyde, polychlorinated
biphenyls or products treated with polychlorinated biphenyls, radioactive
substances garbage or industrial waste or any underground storage tank.
43. Migration of Hazardous Materials. No Hazardous Material has passed onto
adjoining lands from any Real Property of Dragon or the Dragon Subsidiaries.
44. Regulatory Compliance. Dragon and the Dragon Subsidiaries have acquired and
currently hold, all Material Approvals granted by or entered into with any
Regulatory Authority required in connection with their Assets and Business and
all of such Approvals held by Dragon or the Dragon Subsidiaries are in good
standing and are being complied with in all Material respects.
45. Securities Regulatory Matters. Dragon is a reporting issuer in Ontario
listed on the TSX and OTCBB and is not in default of any provisions of the
listing agreement or the rules, by-laws and policies of the TSX, SEC and OTCBB
and is in compliance with all applicable securities laws of Ontario. Neither
Dragon nor any of its shares are subject to any cease trading order.
46. Disclosure Documents. All disclosure documents required to be filed by
Dragon with, and fees required to be paid by Dragon to, securities regulators
have been made and paid as required, and all such disclosure documents were, at
their respective dates of issue, publication or filing, complete and accurate in
all Material respects and made in compliance with the laws, regulations and
rules applicable thereto.
47. Transfer Agent. Computershare Trust Company of Canada, at its principal
offices in Vancouver and Toronto, has been duly appointed as registrar and
transfer agent in respect of the Common Shares.
48. Compliance with Laws. Dragon and the Dragon Subsidiaries have, in all
Material respects, conducted their Business in compliance with all Applicable
Law and are not in unremedied breach, and have not received any notification
alleging that they are in breach, of any Applicable Law. 48. Validity. All of
the foregoing representations and warranties of Dragon will be true and correct
on the Closing Date as if made on that date.
SCHEDULE B
Release of Additional Dragon Closing Shares
As at May 17, 2004, Dragon had a total of 3,549,000 Common Shares subject to
issue on the exercise of Dragon Convertible Securities, as set out in the
following table:
--------------------------------------------------------------------------------
Number of Common Shares Exercise Price
Subject to Option or Warrant(1) (per share) Expiry Date
--------------------------------------------------------------------------------
100,000(2) $0.50 Nov 5, 2004
--------------------------------------------------------------------------------
172,500(2) $0.50 Nov 9, 2004
--------------------------------------------------------------------------------
60,000(2) $2.50 Nov 9, 2004
--------------------------------------------------------------------------------
50,000(3) $1.70 Nov 15, 2004
--------------------------------------------------------------------------------
16,000(2) $0.50 Jan 5, 2005
--------------------------------------------------------------------------------
1,275,000(2) $3.125 Nov 13, 2005
--------------------------------------------------------------------------------
1,000,000(3)(4) $2.50 Jan 14, 2007
--------------------------------------------------------------------------------
375,500(2) $1.70 April 25, 2007
--------------------------------------------------------------------------------
500,000(2) $0.68 April 3, 2008
--------------------------------------------------------------------------------
Total: 3,549,000
--------------------------------------------------------------------------------
(1) Each Dragon Convertible Security may be exercised to acquire one Common
Share.
(2) Issuable on exercise of options.
(3) Issuable on exercise of warrants.
(4) Subject to cancellation under the terms of a Settlement Agreement among
Dragon, Dr. Longbin Liu and Novagen Holding Inc. dated April 4, 2004.
All Additional Dragon Closing Shares will be deposited under the Escrow
Agreement. For each Dragon Convertible Security that expires unexercised or is
otherwise cancelled, the escrow agent, on behalf of the Vendors, will return to
Dragon for cancellation that number of Additional Dragon Closing Shares
calculated according to the following formula:
-2-
--------------------------------------------------------------------------------
Yan-Xxx Xxx (A) divided by 0.3165 x 0.6835 x 0.70
--------------------------------------------------------------------------------
Zhan-Xxx Xxxx (A) divided by 0.3165 x 0.6835 x 0.20
--------------------------------------------------------------------------------
Xue-Xxx Xxx (A) divided by 0.3165 x 0.6835 x 0.10
--------------------------------------------------------------------------------
where (A) is the number of Dragon Convertible Securities that expire unexercised
or are cancelled. This calculation will be made as soon as practicable after the
expiry or cancellation of a Dragon Convertible Security.
For each Dragon Convertible Security that is exercised, the escrow agent will
release to the Vendors that number of Additional Dragon Closing Shares
calculated according to the following formula:
--------------------------------------------------------------------------------
Yan-Xxx Xxx (A) divided by 0.3165 x 0.6835 x 0.70
--------------------------------------------------------------------------------
Zhan-Xxx Xxxx (A) divided by 0.3165 x 0.6835 x 0.20
--------------------------------------------------------------------------------
Xue-Xxx Xxx (A) divided by 0.3165 x 0.6835 x 0.10
--------------------------------------------------------------------------------
where (A) is the number of Dragon Convertible Securities that are exercised.
This calculation will be made on a quarterly basis, or sooner at the request of
the Vendors.
SCHEDULE C
Escrow Agreement
ESCROW AGREEMENT
THIS AGREEMENT is made effective this ____ day of ____, 2004
AMONG:
DRAGON PHARMACEUTICAL INC., of 1990 - 0000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
("Dragon")
AND:
LML&S SERVICES INC. of 1500 - 0000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
("Escrow Agent")
AND:
YAN-XXX XXX, c/o Shanxi Weigida Pharmaceutical Co. Ltd.,
Datong Economic and Technology Development Zone,
Shanxi, China 037300
ZHAN-XXX XXXX, c/o Shanxi Weigida Pharmaceutical Co.
Ltd., Datong Economic and Technology Development Zone,
Shanxi, China 037300
XUE-XXX XXX, x/x Xxxxxxxx Xxxxxxxxxx, 0/X, Xxxxx X, Xxxxxxx
Center, Xx. 0, Xxxxxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxxx,
Xxxxx 100022
(collectively, the "Vendors" and each, a "Vendor")
WHEREAS:
(A) Pursuant to a share purchase agreement made o, 2004 (the "Share Purchase
Agreement") among Dragon, the Vendors and Oriental Wave Holding Inc.
("Oriental"), the Vendors have sold their shares of Oriental to Dragon for
common shares of Dragon; and
(B) The Share Purchase Agreement provides for the deposit by the Vendors with
the Escrow Agent of certificates representing a total of o common shares of
Dragon, to be held and released in accordance with the terms of this Agreement;
WITNESSES that in consideration of the mutual covenants and agreements contained
in this Agreement and in the Share Purchase Agreements, the Parties agree as
follows:
-2-
PART 1
DEFINITIONS, INTERPRETATION AND SCHEDULES
Definitions
1.1 In this Agreement, except as otherwise expressly provided or as the context
otherwise requires,
(a) "ADCS Escrow Shares" means a total of o common shares of Dragon
deposited hereunder and designated in the Share Purchase Agreement as the
"Additional Dragon Closing Shares";
(b) "Agreement" means this Escrow Agreement and the schedules attached
hereto, as may be supplemented or amended from time to time and in effect;
(c) "Business Day" means a day that is not a Saturday, Sunday or statutory
holiday in Vancouver, British Columbia;
(d) "Claim" has the meaning ascribed to it in Section 4.4;
(e) "DCS Escrow Shares" means a total of o common shares of Dragon
deposited hereunder and designated in the Share Purchase Agreement as the
"Dragon Closing Shares";
(f) "Dispute" has the meaning ascribed to it in Section 5.1;
(g) "Effective Date" means the effective date of this Agreement, being the
date first above written;
(h) "Escrow Agreement Claim" has the meaning ascribed to it in Section 3.5;
(i) "Escrow Shares" means the ADCS Escrow Shares and the DCS Escrow Shares;
(j) "Force Majeure" means any event or occurrence beyond the reasonable
control of a Party which prevents such Party from performing its
obligations under this Agreement including an act of God, government order,
strike, lockout or other industrial disturbance, war, terrorist act,
blockade, insurrection, riot, earthquake, typhoon, hurricane, flood or
other natural disaster;
(k) "Notice" has the meaning ascribed to it in Section 6.2;
(l) "Party" means a Person that is a party to this Agreement;
(m) "Person" means any individual, company, body corporate, firm, limited
or unlimited liability company, partnership, syndicate, joint venture,
society, association, trust, unincorporated organisation or government
authority, or any trustee, executor, administrator or other legal
representative thereof;
-3-
(n) "Vendors' Declaration" has the meaning ascribed to in Section 4.8; and
(o) "Vendors' Representative" means Yan-Xxx Xxx or another individual
appointed by the Vendors to act as their representative, provided written
notice of such appointment is provided to Dragon and the Escrow Agent;
Interpretation
1.2 In this Agreement, except as otherwise expressly provided,
(a) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define or limit the scope,
extent or intent of this Agreement or any provision hereof;
(b) whenever required by context, a word importing the masculine gender
includes the feminine or neuter gender and a word in the singular includes
the plural and vice versa;
(c) a reference to a Part means a Part of this Agreement and the word
"Section " followed by a number or letter or some combination of numbers
and letters refers to the provision of this Agreement so designated and the
words "hereof", "hereto", "herein" and "hereunder" refer to the entirety of
this Agreement rather than any particular Part or section;
(d) a reference to a statute includes all regulations made pursuant
thereto, all amendments to the statute or regulations in force from time to
time and any statute or regulations that supplement or supersede such
statute or regulations;
(e) a reference to a corporate entity includes any successor to that
entity; (f) a reference to currency means Canadian currency;
(g) a reference to "approval", "authorization", "notice" or "consent" means
written approval, authorization, notice or consent not to be unreasonably
withheld or delayed;
(h) the words "including" and "include", when following a general statement
or term, are not to be construed as limiting the general statement or term
to any specific item or matter set forth or to similar items or matters,
but rather as permitting the general statement or term to refer to all
other items or matters that could reasonably fall within its broadest
possible scope; and
(i) an accounting term not otherwise defined herein has the meaning
assigned to it, and every calculation to be made hereunder is to be made,
in accordance with Canadian Generally Accepted Accounting Principles,
applied on a consistent basis.
-4-
PART 2
ESTABLISHMENT OF ESCROW
Appointment of Escrow Agent
2.1 Dragon and the Vendors hereby appoint the Escrow Agent to act as escrow
agent, and the Escrow Agent agrees to such appointment, on the terms and
conditions set forth in this Agreement.
Acceptance of Deposits
2.2 Escrow Agent hereby acknowledges receipt of the Escrow Shares and
concurrent with the execution of this Agreement will deliver to each Vendor a
receipt for the Escrow Shares they deposited. Part 11
ESCROW AGENT
Escrow Shares
3.1 The Escrow Shares deposited with the Escrow Agent will be held in escrow
and dealt with by the Escrow Agent in accordance with this Agreement.
Terms and Conditions
3.2 The Escrow Agent accepts its duties and obligations under this Agreement on
the following terms and conditions:
(a) the Escrow Agent may rely upon any notice, request, statement, waiver,
consent, receipt, certificate or any paper or document furnished to it, and
executed with or without seal by any of Dragon or a Vendor or any other
Person, not only as to its due execution and the validity and effectiveness
of its provisions but also as to the truth and acceptability of any
information therein contained, and the Escrow Agent will not be required to
determine the authenticity of signatures or the power and authority of any
signatory to execute any document;
(b) the Escrow Agent may engage such professional advisers and legal
counsel as it determines to be necessary or advisable in order to fulfil
its obligations under this Agreement;
(c) the Escrow Agent will not be required to make any determination or
decision with respect to the validity of any claim made by any Party or of
any denial thereof but will be entitled to rely conclusively on the terms
hereof and the documents tendered to it in accordance with the terms
hereof;
-5-
(d) the duties and obligations of the Escrow Agent hereunder are purely
administrative in nature and the Escrow Agent will not be liable for any
error of judgement, or for any act done or step taken or omitted by it in
good faith, or for any mistake of fact or law, or for anything which it may
do or refrain from doing in connection herewith, except for the gross
negligence, wilful default or dishonesty of its employees or agents;
(e) upon the Escrow Agent's delivery of the Escrow Shares in accordance
with the provisions of this Escrow Agreement, the Escrow Agent will be
automatically and immediately released from all duties and obligations
under this Agreement to any Party and to any other Person with respect to
any of the Escrow Shares held in escrow under this Agreement;
(f) the Escrow Agent may, if the Escrow Agent deems it necessary or
desirable, seek advice and directions from the Supreme Court of British
Columbia with respect to its duties and obligations hereunder; and
(g) the duties and obligations of the Escrow Agent hereunder will at all
times be subject to the orders or directions of a court of competent
jurisdiction in the Province of British Columbia.
Consents and Waivers
3.3 The Escrow Agent will have no duties except as expressly set forth herein,
and will not be bound by any notice of a claim or demand with respect thereto,
or any waiver, modification, amendment, termination or rescission of this
Agreement, unless received by it in writing, and executed by Dragon and the
Vendors, and, if the Escrow Agent's duties, obligations or liabilities herein
are affected, unless it gives its written consent thereto.
Interpleader
3.4 The Escrow Agent may, at any time, give notice to all other Parties that
the Escrow Agent is terminating its duties and obligations hereunder, and
(a) at any time more than 30 days after it gives such notice; and
(b) before the other Parties jointly direct the Escrow Agent as to
delivery of the Escrow Shares in its possession to some other Person,
may deliver the Escrow Shares in its possession to the Supreme Court of British
Columbia by way of interpleader and will thereupon be released of its duties and
obligations hereunder. The Parties agree that in no event will the Escrow Agent
be held liable for any failure to deliver all or a portion of the Escrow Shares
during the period referred to in Section 3.4(a).
Indemnity
3.5 The Vendors, collectively, and Dragon (each an "Indemnifying Party") will
jointly and severally indemnify and save harmless the Escrow Agent from and
-6-
against any and all actions, suits, investigations, proceedings or claims of
every kind (each an "Escrow Agreement Claim") and any and all expenses, losses,
damages or liabilities, including reasonable attorney's fees and charges
incidental thereto (collectively "Liabilities") as and when incurred or
sustained, and the reasonable fees and expenses incurred by Escrow Agent in
investigating or defending an Escrow Agreement Claim to which it may become
subject or otherwise involved in any capacity insofar as such Escrow Agreement
Claims or Liabilities arise out of or are based, directly or indirectly, upon
the Escrow Agent's performance of its duties and obligations hereunder, except
to the extent that the Escrow Agent's agents or employees are guilty of gross
negligence, wilful default or dishonesty in the performance of such duties and
obligations. If an Indemnifying Party pays an amount to the Escrow Agent in
respect of a Liability hereunder, then such Indemnifying Party is entitled to
recover from the other Indemnifying Party one-half of the amount of such
Liabilities paid.
Fees and Expenses
3.6 The Indemnifying Parties will jointly and severally reimburse the Escrow
Agent for any and all fees and expenses incurred in connection with the
performance of its duties hereunder, including but not limited to fees and
expenses incurred pursuant to Section 3.4. If an Indemnifying Party pays an
amount to the Escrow Agent in respect of any fees and expenses hereunder, then
such Indemnifying Party is entitled to recover from the other Indemnifying Party
one-half of the amount of such fees and expenses paid.
Escrow Agent's Counsel
3.7 Each of the parties confirms that it is aware that the Escrow Agent is a
corporation that is controlled and directed by Lang Xxxxxxxx, which acts as
counsel to Dragon. The Escrow Agent may not retain Lang Xxxxxxxx as counsel in
the event of any dispute hereunder.
PART 4
RELEASE FROM ESCROW
Release of Escrow Shares
4.1 The Escrow Agent will release the Escrow Shares held by it in escrow and
discharge its obligations hereunder only in accordance with
(a) joint written instructions from Dragon (executed by a senior officer
other than any Vendor who is a senior officer) and the Vendors'
Representative,
(b) in the circumstances of Section 4.5(a), Section 4.5(b) or Section 4.7,
the written instruction of Dragon
(c) in the circumstances of Section 4.8, the written instruction of the
Vendors' Representative that is not disputed by Dragon, or
-7-
(d) an award or decision of an arbitrator pursuant to Part 5 or an order of
a court of competent jurisdiction in a final determination.
Delivery
4.2 Upon receipt of the instructions described in Section 4.1, the Escrow Agent
will, within five Business Days, deliver the applicable Escrow Shares in
accordance with such instructions.
Joint Direction
4.3 Notwithstanding any other provision of this Part, but subject to an
applicable award, decision or order referred to in Section 4.1(d), the Escrow
Agent may act in accordance with a written direction executed by all other
Parties amending the procedures set forth in this Part or the Escrow Agent's
duties under this Agreement.
Conditions for Release of DCS Escrow Shares
4.4 Dragon and the Vendors acknowledge that the DCS Escrow Shares have been
deposited under this Agreement in support of certain representations and
warranties made by the Vendors to Dragon, and will be released from escrow only
if no claim (a "Claim") is made by Dragon against the Vendors for a breach of a
representation or warranty made by the Vendors to Dragon under Part 3 of the
Share Purchase Agreement or, if a Claim is made, upon its resolution.
4.5 If
(a) no Claim is made by Dragon by the first anniversary of the date hereof,
Dragon will deliver a notice under Section 4.1(b) instructing the Escrow
Agent to deliver 40% of the DCS Escrow Shares to the Vendors,
(b) no Claim is made by Dragon by the second anniversary of the date
hereof, Dragon will deliver a notice under Section 4.1(b) instructing the
Escrow Agent to deliver the remaining DCS Escrow Shares to the Vendors,
(c) if a Claim is made by Dragon, any DCS Escrow Shares that are in escrow
at the date the Claim is made will remain in escrow under this Agreement
until an instruction, award, decision or order is delivered under Section
4.1(a) or (d), and
(d) upon a final determination being made in respect of a Claim, Dragon and
the Vendors will instruct the Escrow Agent on the disposition of the DCS
Escrow Shares, with any determination as to the DCS Escrow Shares, if any,
to be returned to Dragon for cancellation to be made in accordance with the
provisions of Part 8 of the Share Purchase Agreement.
Conditions for Release of ADCS Escrow Shares
4.6 Dragon and the Vendors acknowledge that the ADCS Escrow Shares have been
issued in anticipation of the exercise of the Dragon Convertible Securities (as
defined in the Share Purchase Agreement) and are subject to release or
cancellation in the circumstances set out in Schedule B of the Share Purchase
-8-
Agreement. Dragon covenants that while any Dragon Convertible Securities remain
outstanding it will provide a monthly report to the Vendors and the Escrow Agent
confirming whether and to what extent the Dragon Convertible Securities have
been exercised, expired unexercised or otherwise been cancelled.
4.7 On a quarterly basis, or sooner at the request of the Vendors or at the
discretion of Dragon, Dragon will deliver a written notice under Section 4.1(b)
instructing the Escrow Agent to deliver to the Vendors or Dragon, as applicable,
the ADCS Escrow Shares subject to release or cancellation pursuant to Schedule B
to the Share Purchase Agreement.
Release Requested by Vendors
4.8 If Dragon fails to deliver a notice when required under Section 4.5(a),
Section 4.5(b) or Section 4.7, the Vendors may request the release of the Escrow
Shares as provided under Section 4.5(a), Section 4.5(b) or Section 4.7 by
delivering to the Escrow Agent and Dragon a statutory declaration (the "Vendors'
Declaration") executed by the Vendors' Representative that the Vendors are
entitled to the release of the
(a) DCS Escrow Shares as no Claim has been made by Dragon, or
(b) ADCS Escrow Shares on the basis of the calculations provided by Dragon
under Section 4.6.
If within 10 Business Days of the receipt of the Vendors' Declaration the Escrow
Agent has not received from Dragon a written notice that it disputes such
declaration, the Escrow Agent will release the applicable Escrow Shares to the
Vendors.
Pro Rata Release of Escrowed Shares
4.9 Any release of Escrow Shares to the Vendors hereunder will be made in the
following proportions:
Yan-Xxx Xxx 70%
Zhan-Xxx Xxxx 20%
Xue-Xxx Xxx 10%
Voting of DCS Escrow Shares
4.10 The Vendors will be entitled to exercisfe all voting rights in connection
with the DCS Escrow Shares notwithstanding their deposit in escrow under this
Agreement.
Voting and Dividends - ADCS Escrow Shares
4.11 Neither the Vendors nor any other person will be entitled to exercise any
voting rights or receive any dividends or distributions in respect of the ADCS
Escrow Shares until they have been released from escrow under this Agreement.
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PART 5
DISPUTE RESOLUTION
Submission to Arbitration
5.1 If, at any time, there is a dispute, controversy or claim (each a
"Dispute") with respect to any matter arising out of or relating to this
Agreement, such Dispute will be referred to arbitration in accordance with the
arbitration provisions of the Share Purchase Agreement, and each Party will
accept as final and binding and proceed in good faith diligently to implement
the award or decision of the arbitrator.
PART 6
GENERAL PROVISIONS
Governing Law
6.1 This Agreement will be exclusively governed by, and interpreted and
construed in accordance with, the laws prevailing in the Province of British
Columbia and the Parties irrevocably and unconditionally attorn to the exclusive
jurisdiction of the courts of British Columbia and all courts having appellate
jurisdiction thereover.
Notice
6.2 Every notice, request, demand or direction (each a "Notice") to be given
pursuant to this Agreement must be in writing and must be delivered by hand
(e.g. Federal Express or other reputable courier service) or sent by facsimile
transmission or other similar form of written transmission by electronic means,
in each case addressed as follows:
(a) If to Dragon, at:
1900 - 0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Secretary
Telecopier: (000) 000-0000
(b) If to either Xxx Xxx Han or Zhan Xxx Xxxx, at:
x/x Xxxxxx Xxxxxxx Pharmaceutical Co. Ltd.
Datong Economic and Technology Development Xxxx
Xxxxxx, Xxxxx 000000
Telecopier: x00-000-0000000
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(c) If to Xue-Xxx Xxx, at:
x/x Xxxxxxxx Xxxxxxxxxx
0/X, Xxxxx X, Xxxxxxx Center
Xx. 0, Xxxxxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx
Xxxxxxx, Xxxxx 100022
Telecopier: x00-00-0000-0000
with a copy to:
Bull, Housser & Xxxxxx
Barristers & Solicitors
3000 - 0000 Xxxx Xxxxxxx Xxxxxx
P.O. Box 11130
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
(d) If to the Escrow Agent, at:
LML&S Services Inc.
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Secretary
Telecopier: (000) 000-0000
or to such other address or transmission receiving number as specified by a
Party by Notice to the other Parties.
6.3 A notice delivered or sent in accordance with the preceding section will be
deemed to be given and received
(a) at 9:00 a.m. on the day of delivery or receipt at the place of delivery
or receipt if that day is a Business Day at that place and the delivery or
receipt is before that time on that day,
(b) at the time of delivery or receipt if received on or after 9:00 a.m.
and before 4:00 p.m. at the place of delivery or receipt on a day that is a
Business Day at that place, and
(c) at 9:00 a.m. at the place of delivery or receipt on the next day that
is a Business Day at that place, if delivered or received on a day that is
not a Business Day at that place or after 4:00 p.m. at that place.
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Language of Document
6.4 All correspondence in respect of this Agreement or the enforcement of
rights of the parties hereunder will be made in the English language only.
Time of Essence
6.5 Time is of the essence in the performance of each obligation under this
Agreement.
Termination and Discharge of Escrow Agent
6.6 This Agreement will terminate and the Escrow Agent will be discharged of
its obligations in any of the following circumstances:
(a) the Escrow Shares are properly released in accordance with Part 4;
(b) this Agreement is terminated by the Escrow Agent under Section 3.4 and
the Escrow Shares are safely in the hands of the new appointee or the
court; or
(c) the destruction or corruption of the Escrow Shares, if any, as a result
of Force Majeure.
Force Majeure
6.7 No Party will be liable to any other Party for default or delay in the
performance of its obligations under this Agreement to the extent such default
or delay is caused by an occurrence of Force Majeure.
Entire Agreement
6.8 The Escrow Agent is not a party to, and is not bound by, any provisions
which may be evidenced by, or arise out of, any agreement other than as set
forth in the express provisions of this Agreement.
Waiver and Consent
6.9 No delay or failure by a Party to exercise any of its rights under this
Agreement constitutes a waiver of any such right. No consent or waiver, express
or implied, by a Party to, or of any breach or default by another Party of, any
or all of its obligations under this Agreement will,
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this Section 6.9,
(b) be relied upon as a consent to or waiver of any other breach or default
of the same or any other obligation,
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(c) constitute a general waiver under this Agreement, or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this Section 6.9 in any other or subsequent instance.
Severability
6.10 If any provision of this Agreement is at any time unenforceable or invalid
for any reason, it will be severable from the remainder of this Agreement and,
in its application at that time, this Agreement will be construed as though such
provision was not contained herein and the remainder will continue in full force
and effect and be construed as if this Agreement had been executed without the
invalid or unenforceable provision.
Amendments
6.11 This Agreement may not be amended except in writing signed by each Party.
Further Assurances
6.12 Each Party will execute and deliver such further agreements and other
documents and do such further acts and things as another Party reasonably
requests to evidence, carry out or give full force and effect to the intent of
this Agreement.
No Agency
6.13 Each Party is an independent contractor and nothing herein will, or will be
deemed to, create any employer/employee, agency, partnership or joint venture
relationship among the Parties or to give any Party any right or authority to
act as the agent of, assume or create any obligation on behalf of or to pledge
the credit of any other Party.
Assignment
6.14 This Agreement and the individual rights and obligations hereunder may not
be transferred or assigned in whole or in part by any Party, whether by
contract, operation of law or otherwise, without the consent of each other
Party, and any purported transfer or assignment without such consent will be
null and void. Nothing in this Section 6.14 will be deemed to limit or restrict
the Escrow Agent's rights under Section 3.4.
Enurement
6.15 This Agreement and the provisions hereof will enure to the benefit of and
be binding upon the Parties and their respective successors and permitted
assigns.
Survival
6.16 All rights and obligations of the Parties occurring before the effective
date of termination of this Agreement and all rights and obligations expressly
stated to continue after, or accrue as a result of, the termination of this
Agreement are separate and distinct rights and obligations binding on the
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Parties, will survive its termination and will continue in full force and effect
and nothing herein will affect the enforceability of such provisions. For
greater certainty, the premature termination of this Agreement will not affect
the rights and obligations of any Party under Section 3.4, Section 3.5 and Part
6.
Counterparts
6.17 This Agreement may be executed in any number of counterparts, in original
form or by facsimile, each of which will together, for all purposes, constitute
one and the same instrument, binding on the Parties, and each of which will
together be deemed to be an original, notwithstanding that each Party is not a
signatory to the same counterpart.
IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
Effective Date.
DRAGON PHARMACEUTICAL INC.
Per:
--------------------------------------------
Authorized Signatory
Per:
--------------------------------------------
Authorized Signatory
LML&S SERVICES INC.
Per:
--------------------------------------------
Authorized Signatory
Signed, Sealed and Delivered by Yan-Xxx Xxx)
in the presence of: )
)
)
)
-------------------------------------------) -------------------------------
Witness (Signature) ) YAN-XXX XXX
)
)
-------------------------------------------)
Name (please print) )
)
)
-------------------------------------------)
Address )
)
)
-------------------------------------------)
City, Province )
)
)
-------------------------------------------)
Occupation )
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Signed, Sealed and Delivered by Zhan-Guo )
Weng in the presence of: )
)
)
)
-------------------------------------------) -------------------------------
Witness (Signature) ) ZHAN-XXX XXXX
)
-------------------------------------------)
Name (please print) )
)
-------------------------------------------)
Address )
)
-------------------------------------------)
City, Province )
)
-------------------------------------------)
Occupation )
Signed, Sealed and Delivered by Xue-Xxx Xxx)
in the presence of: )
)
)
-------------------------------------------) -------------------------------
Witness (Signature) ) XUE-XXX XXX
)
-------------------------------------------)
Name (please print) )
)
-------------------------------------------)
Address )
)
-------------------------------------------)
City, Province )
)
-------------------------------------------)
Occupation )
SCHEDULE D
OPINIONS REQUIRED FROM COUNSEL TO VENDORS
1. Appropriate assumptions and qualifications.
2. Due incorporation, organization, good standing and subsistence of Oriental
Wave and each of its subsidiaries.
3. Corporate power of Oriental Wave and each of its subsidiaries to own or
lease property and to carry on business.
4. Corporate power of Oriental Wave to execute and deliver the Agreement and
the Escrow Agreement and to perform its obligations under those agreements.
5. Due authorization (all necessary corporate action taken) of this Agreement
and the Escrow Agreement by Oriental Wave.
6. Due execution and delivery of this Agreement and the Escrow Agreement by
Oriental Wave and each of the Vendors.
7. Valid, binding and legal obligation of, and enforceability of, this
Agreement and the Escrow Agreement against Oriental Wave and each of the
Vendors.
8. Non-contravention of constating documents, applicable laws, regulatory
approvals and agreements. 9. Authorized and issued share capital and
registered shareholders of Oriental Wave and each of its subsidiaries.
10. Valid issuance of all of the Vendors Shares as fully-paid and
non-assessable shares.
11. Valid transfer of the Vendors Shares in compliance with applicable law,
constating documents and any applicable agreements.
12. Knowledge of any Litigation.
13. Such other matters are may be reasonably requested by counsel for Dragon.
SCHEDULE E
OPINIONS REQUIRED FROM COUNSEL TO DRAGON
1. Appropriate assumptions and qualifications.
2. Due incorporation, organization, good standing and subsistence of Dragon
and each of its subsidiaries.
3. Corporate power of Dragon and each of its subsidiaries to own or lease
property and to carry on business.
4. Corporate power of Dragon to execute and deliver the Agreement and the
Escrow Agreement and to perform its obligations under those agreements.
5. Due authorization (all necessary corporate action taken) of this Agreement
and the Escrow Agreement by Dragon.
6. Due execution and delivery of this Agreement and the Escrow Agreement by
Dragon.
7. Valid, binding and legal obligation of, and enforceability of, this
Agreement and the Escrow Agreement against Dragon.
8. Non-contravention of constating documents, applicable laws, regulatory
approvals and agreements.
9. Authorized and issued share capital of Dragon.
10. Authorized and issued share capital and registered shareholders of each
subsidiary of Dragon.
11. Valid issuance of the Dragon Closing Shares and additional Common Shares in
compliance with applicable laws.
12. Valid issuance of all of the Dragon Closing Shares and additional Common
Shares issuable to the Vendors as fully-paid and non-assessable shares.
13. TSX and OTCBB approval. 14. Reporting issuer status. 15. Knowledge of any
Litigation.
16. Such other matters are may be reasonably requested by counsel for the
Vendors.
