UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 11, 2005
DRAGON PHARMACEUTICAL INC.
--------------------------
(Exact name of registrant as specified in its charter)
Florida 0-27937 65-0142474
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State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
1055 Hastings Street, Suite 1900
Vancouver, British Columbia V6E 2E9
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(Address of Principal Executive Offices) (Zip Code)
(604) 669-8817
--------------
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets
On June 11, 2004, Dragon Pharmaceutical Inc. (the "Company"), Oriental Wave
Holding Ltd. ("Oriental Wave") and Mr. Yanlin Han, Mr. Zhanguao Weng, and Ms.
Xuemei Liu entered into a Share Purchase Agreement. Under the terms of the Share
Purchase Agreement, Mr. Han, Mr. Weng and Ms. Liu would receive in the aggregate
shares of common stock equal to 68.35% of the Company's outstanding common stock
after consummation of the acquisition of Oriental Wave in exchange for all of
their shares of Oriental Wave. In addition, Mr. Han, Mr. Weng and Ms. Liu would
also receive additional shares of common stock ("Additional Dragon Closing
Shares") such that they will continue to own 68.35% of the Company's common
stock if all of the Company's outstanding options and warrants to purchase
common stock as of the date of the closing are exercised.
On January 11, 2005, the Company's shareholders approved two proposals
related to the acquisition of Oriental Wave. The terms of Share Purchase
Agreement, financial statements for the Company and Oriental Wave, and
description of the proposals were described in a proxy statement dated December
8, 2004. The closing of the acquisition of Oriental Wave pursuant to the Share
Purchase Agreement occurred on January 12, 2005. Under terms of the Share
Purchase Agreement, Mr. Han, Mr. Weng and Ms. Liu received in the aggregate
44,502,004 shares of common stock of which 26,533,405 shares are subject to
escrow. The shares of common stock held in escrow will be released on the first
and second anniversary dates of the close provided that the Company has made no
claims against Oriental Wave and its shareholders for misrepresentations made in
the Share Purchase Agreement. Mr. Han, Mr. Weng and Ms. Liu will retain voting
rights of those shares held in escrow. In addition, pursuant to the Share
Purchase Agreement, Mr. Han, Mr. Weng and Ms. Liu collectively received
4,282,402 Additional Dragon Closing Shares. The Additional Dragon Closing Shares
are being held in escrow and may be released or cancelled depending on whether
or not certain of the Company's options or warrants outstanding as of the close
have been subsequently exercised or expired. Mr. Han, Mr. Weng and Ms. Liu will
have no voting rights or dispositive powers over the Additional Dragon Closing
Shares while they are held in escrow, and they will not be deemed to be
outstanding unless they are released from escrow.
Item 3.02 Unregistered Sales of Equity Securities.
On January 12, 2005, the Company completed the acquisition of all the
outstanding shares of Oriental Wave pursuant to the Share Purchase Agreement. In
connection with the acquisition, the Company issued an aggregate of 44,502,004
shares of common stock and 4,282,402 shares of Additional Dragon Closing Shares
as follows:
---------------------- ------------------ --------------------------------------
Name Common Stock Additional Dragon Closing Shares
---------------------- ------------------ --------------------------------------
Yanlin Han 31,151,403 2,997,682
---------------------- ------------------ --------------------------------------
Zhanguao Weng 8,900,401 856,480
---------------------- ------------------ --------------------------------------
Xuemei Liu 4,450,200 428,240
---------------------- ------------------ --------------------------------------
The issuance of the shares of common stock and Additional Dragon Closing
Shares by the Company to Mr. Han, Mr. Weng and Ms. Liu pursuant to the Share
Purchase Agreement was exempt from registration upon reliance of Regulation S.
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Item 5.01 Changes in Control of Registrant
(a) As a result of the consummation of the Share Purchase Agreement, there
has been a change in control of the registrant. Mr. Han beneficially owns
31,151,403 shares of common stock, or 47.8% of the outstanding common stock, of
which 18,573,384 shares are subject to escrow. Mr. Weng beneficially owns
8,900,401 shares of common stock, or 13.7 % of the outstanding common stock, of
which 5,306,681 shares are subject to escrow. Ms. Liu beneficially owns
4,650,200 shares of common stock, or 7.1% of the outstanding common stock, of
which 2,653,340 shares are subject to escrow.
(b) The following table shows the amount of our common stock beneficially
owned (unless otherwise indicated) by each shareholder known by us to be the
beneficial owner of more than 5% of our common stock, by each of our executive
officers and directors as of January 12, 2005.
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Share Beneficially Owned
------------------------------------------------------
------------------------ ------------------------
Name and Address of Beneficial Owner Number Percent
------------------------ ------------------------
Maggie Deng, Chief Operating Officer 200,000(1) *
Garry Wong, Chief Financial Officer 200,000(1) *
Alexander Wick, President and Director 975,000(2) 1.4%
Yiu Kwong Sun, Director 975,000(3) 1.4%
Yanlin Han, Chief Executive Officer & Director 31,151,403 47.8%
Zhangou Weng, Vice President, China
Operation & Director 8,900,401 13.7%
Xuemei Liu, Director 4,650,200(4) 7.1%
-------------------------------------------------------------------------------------------------------
Notes:
* Less than one percent.
(1) Represents options to purchase shares of common stock exercisable within
sixty days.
(2) Includes options to purchase 675,000 shares exercisable within sixty days.
(3) Includes options to purchase 275,000 shares of common stock owned
exercisable within sixty days. Also includes 100,000 shares of common stock
directly owned and 600,000 shares of common stock owned by Yukon Health
Enterprises for which Mr. Sun serves as a director.
(4) Includes options to purchase 200,000 shares of common stock.
Item 5.02 Departure of Directors of Principal Officers; Election of Directors;
Appointment of Principal Officers.
Pursuant to the Share Purchase Agreement, on January 12, 2005, Mr. Han, Mr.
Weng and Ms. Liu were appointed to the Company's Board of Directors. Mr. Han was
also elected as Chairman of the Board. The Company's Board of Directors now
consists of five directors including Dr. Wick and Dr. Sun who were reelected to
the Board at the annual meeting of shareholders held on January 11, 2005.
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In addition, effective January 12, 2005, the following officers were
appointed to the Company:
Chief Executive Officer: Mr. Han
President: Dr. Wick
Vice President, China Operation: Mr. Weng
Chief Operating Officer: Ms. Maggie Deng
Chief Financial Officer: Mr. Garry Wong
As description of Mr. Han, Dr. Wick and Mr. Weng was in the Company's proxy
statement dated December 8, 2004.
The business background for Ms. Deng and Mr. Wong for the past five years
is as follows:
Maggie Deng. Maggie Deng, age 37, holds a Bachelor degree from
Tsinghua University in China. Ms Deng has over 10 years of experience
working in or with public companies, mainly on IPOs and secondary offering
for Chinese companies on domestic stock exchange as well as international
ones. Ms Deng was the senior manager of China International Capital
Corporation, a Morgan Stanley joint venture investment banking firm in
China, from 1998 to 2001. Ms Deng moved to Canada in 2001 and held a
position of Assistant to President in a start-up biotech company in
Vancouver.
Garry Wong. Mr. Wong has been appointed as our Chief Financial Officer
since January 2005. Prior to his current position, Mr. Wong served as our
Executive Assistant to President and CEO from February 2002 to January
2005. Before joining us, Mr. Wong was a member of the Global Mergers and
Acquisitions Group at Nortel Networks since 1996. He managed and executed
transactions consisted of acquisitions, divestitures, equity investments,
spin-offs, public market listing and joint ventures, and occurred in
Europe, North America, Asia and the Middle East. Mr. Wong is a Chartered
Financial Analyst, who received an International MBA degree from York
University with double majors in Corporate Finance and Greater China
studies and a Bachelor degree in Business Administration from University of
Hong Kong.
Mr. Wong replaces Mr. Matthew Kavanagh who was previously Chief Financial
Officer.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
10.16 Waivers of Certain Conditions to the Share Purchase
Agreement
10.17 Escrow agreement among Dragon Pharmaceutical, Oriental Wave
Holding Limited, Yanlin Han, Zhanguo and Xuemei Liu.
99.1 Press release dated January 11, 2004.
99.2 Press release dated January 14, 2004
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 17, 2005 DRAGON PHARMACEUTICAL INC.
/s/ Garry Wong
--------------------------------------------
Garry Wong
Chief Financial Officer
(Principal Financial and Accounting Officer)
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Exhibit 10.16
DRAGON PHARMACEUTICAL INC.
("DRAGON")
WAIVER AND ACKNOWLEDGEMENT
To: Oriental Wave Holding Ltd. ("Oriental")
And: Yan-Lin Han, Zhan-Guo Weng and Xue-Mei Liu (collectively, the
"Vendors" and each, a "Vendor")
Re: Share Purchase Agreement (the "Agreement") made among Dragon, Oriental
and the Vendors
--------------------------------------------------------------------------------
The undersigned, pursuant to ss.4.4 of the Agreement, hereby waives, on behalf
of Dragon, compliance by Oriental and the Vendors of their obligation under the
Agreement to deliver
1. pursuant to ss.6.2(b), a certificate of status, compliance, good standing
or like certificate with respect to each subsidiary of Oriental, issued by
appropriate government officials of their respective jurisdictions of
incorporation,
2. pursuant to ss.6.2(d), the consents of the Vendors to their appointment to
the board of directors of Dragon, and
3. pursuant to ss.6.2(h), legal opinions addressing the matters set out at
numbers 2 and 3 with respect to Oriental's subsidiaries, number 4, number 5 with
respect to the Escrow Agreement, numbers 6, 7 and 8, number 9 with respect to
Oriental's subsidiaries and numbers 10 and 12 of Schedule D to the Agreement.
The undersigned also acknowledges that Oriental has advised it that no Consents
or Regulatory Approvals are required to be obtained by Oriental in connection
with the Agreement
DATED January 12, 2005.
DRAGON PHARMACEUTICAL INC.
/s/ Dr. Alexander Wick
-------------------------
Dr. Alexander Wick
President
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WAIVER AND ACKNOWLEDGEMENT
To: Dragon Pharmaceutical Inc. ("Dragon")
Re: Share Purchase Agreement (the "Agreement") made among Dragon, Oriental
Wave Holding Ltd. ("Oriental"), Yan-Lin Han, Zhan-Guo Weng, and
Xue-Mei Liu (collectively, the "Vendors" and each, a "Vendor")
--------------------------------------------------------------------------------
The Vendors, pursuant to ss.4.2 of the Agreement, hereby waive compliance by
Dragon of its obligation under the Agreement to deliver
1. pursuant to ss.6.3(c), a certificate of status, compliance, good standing
or like certificate with respect to each subsidiary of Dragon, issued by
appropriate government officials of their respective jurisdictions of
incorporation, and
2. pursuant to ss.6.3(k), legal opinions addressing the matters set out in
Schedule E to the Agreement.
The undersigned also acknowledge that Dragon has advised them that no Consents
or Regulatory Approvals other than the approval of the Toronto Stock Exchange
are required to be obtained by Dragon under the Agreement.
DATED January 12, 2005.
/s/ Yan-Lin Han
----------------------
Yan-Lin Han
/s/ Zhan-Guo Weng
----------------------
Zhan-Guo Weng
/s/ Xue-Mei Liu
----------------------
Xue-Mei Liu
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Exhibit 10.17
ESCROW AGREEMENT
THIS AGREEMENT is made effective this 12th day of January, 2005
AMONG:
DRAGON PHARMACEUTICAL INC., of 1990 - 1055 West Hastings Street,
Vancouver, British Columbia, V6E 2E9
("Dragon")
AND:
LML&S SERVICES INC. of 1500 - 1055 West Georgia Street, Vancouver,
British Columbia, V6E 4N7
("Escrow Agent")
AND:
YAN-LIN HAN, c/o Shanxi Weigida Pharmaceutical Co. Ltd., Datong
Economic and Technology Development Zone, Shanxi, China 037300
ZHAN-GUO WENG, c/o Shanxi Weigida Pharmaceutical Co. Ltd., Datong
Economic and Technology Development Zone, Shanxi, China 037300
XUE-MEI LIU, c/o Yongfeng Enterprise, 9/F, Tower B, Yingjia Center,
No. 2, Dongsanhuan Nanlu, Chaoyang District, Beijing, China 100022
(collectively, the "Vendors" and each, a "Vendor")
WHEREAS:
(A) Pursuant to a share purchase agreement made June 11, 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 26,533,405 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:
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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 4,282,402 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 ss.4.4;
(e) "DCS Escrow Shares" means a total of 22,251,003 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 ss.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 ss.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 ss.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;
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(n) "Vendors' Declaration" has the meaning ascribed to in ss.4.8; and
(o) "Vendors' Representative" means Yan-Lin Han 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 symbol
"ss." 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.
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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.
Power of Attorney Forms
2.2 Together with the Escrow Shares, each Vendor will deposit with the Escrow
Agent ten undated executed share transfer power of attorney forms in favour of
Dragon (the "PoA Forms") and each Vendor hereby authorizes Dragon to complete
such Vendor's PoA Forms for the purpose of effecting the return and cancellation
of the Escrow Shares as may be provided for pursuant to this Agreement.
Acceptance of Deposits
2.3 The Escrow Agent hereby acknowledges receipt of the Escrow Shares and PoA
Forms and concurrent with the execution of this Agreement will deliver to each
Vendor a receipt for the Escrow Shares they deposited.
PART 3
ESCROW AGENT
Escrow Shares and PoA Forms
3.1 The Escrow Shares and PoA Forms 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;
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(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;
(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,
5
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 ss.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
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 ss.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 Michener, which acts as
counsel to Dragon. The Escrow Agent may not retain Lang Michener 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 and PoA Forms held by it in
escrow and discharge its obligations hereunder only in accordance with
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(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 ss.4.5(a), ss.4.5(b) or ss.4.7, the written
instruction of Dragon,
(c) in the circumstances of ss.4.8, the written instruction of the
Vendors' Representative that is not disputed by Dragon, or
(d) an award or decision of an arbitrator pursuant to Part 5or an order of
a court of competent jurisdiction in a final determination.
Delivery
4.2 Upon receipt of the instructions described in ss.4.1, the Escrow Agent
will, within five Business Days, deliver the applicable Escrow Shares and PoA
Forms 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 ss.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 ss.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 ss.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 and PoA Forms 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 ss.4.1(a) or (d), and
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(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 and PoA Forms, with any determination as to the DCS
Escrow Shares and PoA Forms, 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
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 ss.4.1(b)
instructing the Escrow Agent to deliver to the Vendors or Dragon, as applicable,
the ADCS Escrow Shares and PoA Forms 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 ss.4.5(a),
ss.4.5(b) or ss.4.7, the Vendors may request the release of the Escrow Shares
and PoA Forms as provided under ss.4.5(a), ss.4.5(b) or ss.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 ss.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 and PoA
Forms 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-Lin Han 70%
Zhan-Guo Weng 20%
Xue-Mei Liu 10%
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Voting of DCS Escrow Shares
4.10 The Vendors will be entitled to exercise 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.
Exchanging Share Certificates
4.12 If any release of Escrow Shares under this Part 4would require a number of
shares to be released that is less than the number represented by a share
certificate, then the Escrow Agent is hereby authorized and directed to arrange
for the splitting of a share certificate, with such shares to be released in
accordance with the instructions described in ss.4.1 and a certificate for the
balance of the shares to be returned into escrow. The parties (other than the
Escrow Agent) will cooperate with the Escrow Agent to complete its duties
hereunder including providing any certificates or other documents requested by
the Escrow Agent
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.
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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 - 1055 West Hastings Street
Vancouver, British Columbia
Canada V6E 2E9
Attention: Secretary
Telecopier: (604) 669-4243
(b) If to either Yan Lin Han or Zhan Guo Weng, at:
c/o Shanxi Weiqida Pharmaceutical Co. Ltd.
Datong Economic and Technology Development Zone
Shanxi, China 037300
Telecopier: +86-352-6116451
(c) If to Xue-Mei Liu, at:
c/o Yongfeng Enterprise
9/F, Tower B, Yingjia Center
No. 2, Dongsanhuan Nanlu, Chaoyang District
Beijing, China 100022
Telecopier: +86-10-6566-2924
with a copy to:
Bull, Housser & Tupper
Barristers & Solicitors
3000 - 1055 West Georgia Street
P.O. Box 11130
Vancouver, BC V6E 3R3
Attention: Marion V. Shaw
Facsimile: (604) 641-4949
(d) If to the Escrow Agent, at:
LML&S Services Inc.
1500 - 1055 West Georgia Street
P.O. Box 11117
Vancouver, British Columbia
Canada V6E 4N7
Attention: Secretary
Telecopier: (604) 685-7084
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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.
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 ss.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.
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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 ss.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,
(c) constitute a general waiver under this Agreement, or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this ss.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.
12
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 ss.6.14 will be deemed to limit or restrict the
Escrow Agent's rights under ss.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
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 ss.3.4, ss.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: /s/ Dr. Alexander Wick
----------------------------------
Authorized Signatory
LML&S SERVICES INC.
Per:
----------------------------------
Authorized Signatory
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Signed, Sealed and Delivered by Yan-Lin Han)
in the presence of )
)
) /s/ Yan-Lin Han
--------------------------------------- ) -------------------------------
Witness (Signature) ) YAN-LIN HAN
)
)
--------------------------------------- )
Name (please print) )
)
)
--------------------------------------- )
Address )
)
)
--------------------------------------- )
City, Province )
)
)
--------------------------------------- )
Occupation )
Signed, Sealed and Delivered by Zhan-Guo )
Weng in the )
presence of: )
)
)
) /s/ Zhan-Guo Weng
--------------------------------------- ) -------------------------
Witness (Signature) ) ZHAN-GUO WENG
)
)
--------------------------------------- )
Name (please print) )
)
)
--------------------------------------- )
Address )
)
)
--------------------------------------- )
City, Province )
)
)
--------------------------------------- )
Occupation )
14
Signed, Sealed and Delivered by Xue-Mei Liu)
in the presence of: )
)
)
) /s/ Xue-Mei Liu
-------------------------------------- ) ----------------------
Witness (Signature) ) XUE-MEI LIU
)
)
--------------------------------------- )
Name (please print) )
)
)
--------------------------------------- )
Address )
)
)
--------------------------------------- )
City, Province )
)
)
--------------------------------------- )
Occupation )
15
Exhibit 99.1
Dragon Receives Approval from Shareholders in Connection with the
Acquisition of Oriental Wave Holding Ltd.
VANCOUVER, Jan. 11, 2005 - Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD;
BBSE: DRP) ("the Company") is pleased to announce that at the Annual Meeting of
Shareholders held on January 11, 2005, the shareholders approved the acquisition
by Dragon of Oriental Wave by accepting all the proposals in over 99% of the
shares represented and voting. Over 82% of the outstanding shares were
represented at the meeting. In addition, Dr. Sun and Dr. Wick were re-elected to
the Board, and Moore Stephen Ellis Foster were ratified to audit the Company's
financial statements for the year ended December 31, 2004.
"We, at Dragon, are delighted that this acquisition of Oriental Wave on which we
have worked hard for an extended period of time has been approved by an
overwhelming majority of our shareholders. This demonstration of unity will
provide an excellent basis to successfully face the challenges of the future,"
said Dr. Alexander Wick, President and CEO of Dragon. "Both the physical
presence of individual Dragon shareholders and the owners of Oriental Wave at
the meeting have been highly appreciated."
The Company also wishes to announce that the Toronto Stock Exchange has
conditionally approved the issue of shares in connection with the acquisition of
Oriental Wave, subject to the filing of customary documentation. The Company and
Oriental Wave expect the acquisition to close within the next couple of days.
About Dragon Pharmaceutical Inc.
Dragon Pharmaceutical Inc. is an international bio-pharmaceutical company
headquartered in Vancouver, Canada, with a GMP production facility in Nanjing,
China. Dragon's EPO has been marketed to treat anemia due to renal failure and
surgery in 9 countries: China, India, Egypt, Brazil, Peru, Ecuador, the
Dominican Republic, Trinidad-Tobago and Kosovo. Additional regulatory
submissions are in progress throughout Central and Eastern Europe, Asia, Latin
America, the Middle East and Africa and the Company is in the final preparation
to enter the European Union market.
About Oriental Wave Holding Limited.
Oriental Wave Holding Limited is a privately held holding company of its
operating subsidiary, Shanxi Weiqida Pharmaceutical Co. Ltd. The Company engages
in production and sales of generic pharmaceutical and chemical products with 3
production facilities in Datong city, China.
For further information please contact:
Dragon Pharmaceutical Inc.
Garry Wong, CFA, IMBA
Telephone: +1-(604)-669-8817 or North America Toll Free: 1-877-388-3784
Email: irdragon@dragonpharma.com
Website: www.dragonbiotech.com or www.dragonpharma.com
or
1
Renmark
Financial Communications Inc.
John Boidman: jboidman@renmarkfinancial.com
Sylvain Laberge: slaberge@renmarkfinancial.com
Media - Cynthia Lane: clane@renmarkfinancial.com
Telephone: +1-(514) 939-3989
Website: www.renmarkfinancial.com
2
Exhibit 99.2
Dragon Completes Acquisition of Oriental Wave Holding Ltd.
and Announces Appointment of Key Management Team
VANCOUVER, Jan. 14, 2005- Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD;
BBSE: DRP) ("the Company") is pleased to announce that it has completed the
acquisition of Oriental Wave Holding Ltd.
At closing, and as described in Dragon's proxy statement dated December 8, 2004,
Mr. Yanlin Han, Mr. Zhanguo Weng and Ms. Xuemei Liu were appointed to the Board
of Directors that now consists of five members including Dr. Wick and Dr. Sun
who were re-elected at the Company's annual meeting of shareholders. The Board
of Directors also appointed the following individuals as the key management
team:
Mr. Yanlin Han as the Chief Executive Officer
Dr. Alexander Wick as the President
Mr. Zhanguo Weng as the Vice President, China Operation
Mr. Garry Wong, CFA as the Chief Financial Officer Ms.
Maggie Deng as the Chief Operating Officer
"The first practical step to integrate the original Dragon and Oriental Wave
into a new and efficient organization has already been started" said, Dr.
Alexander Wick, President of Dragon. "A new and state-of-the-art production
facility for EPO (Erythropoietin) using the proven cell-line and technology of
Nanjing Huaxin Bio-pharmaceutical Co. Ltd., the Company's subsidiary in Nanjing,
is being set up on Dragon's Chemical division campus in Datong, sharing the
existing energy and administrative infrastructure. This campus will also house a
new workshop for the freeze-drying of temperature sensitive pharmaceutical
products, among them, Levofloxacin, a currently marketed product of the
Company."
About Dragon Pharmaceutical Inc.
Dragon Pharmaceutical Inc. (Ticker: OTCBB: DRUG, TSX: DDD, BBSE: DRP) is an
international pharmaceutical company headquartered in Vancouver, Canada, with 4
production facilities located in Nanjing and Datong, China. The Company
currently produces more than 40 products in China and markets them in China as
well as internationally. These products are organized under 3 distinct business
divisions: a Pharma division for prescription and over-the-counter generic
drugs, a Chemical division for bulk pharmaceutical chemicals such as Clavulanic
Acid, 7-ACA and sterilized bulk drugs, and a Biotech division for EPO and
in-licensed G-CSF. For the full year of 2003, the Company achieved pro-forma
revenues of US$29.7 million and a net profit of US$5.59 million.
For further information please contact:
Dragon Pharmaceutical Inc.
Garry Wong, CFA, IMBA
Telephone: +1-(604)-669-8817 or North America Toll Free: 1-877-388-3784
Email: irdragon@dragonpharma.com
Website: www.dragonbiotech.com or www.dragonpharma.com
1
or
Renmark Financial Communications Inc.
John Boidman : jboidman@renmarkfinancial.com
Sylvain Laberge : slaberge@renmarkfinancial.com
Media - Cynthia Lane : clane@renmarkfinancial.com
Telephone: +1-(514) 939-3989
Website: www.renmarkfinancial.com
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995: All statements, other
than historical facts, included in the foregoing press release are
forward-looking statements. These statements are based on management's
beliefs and assumptions, and on information currently available to
management. Forward- looking statements are not guarantees of future
performance. They involve risk, uncertainties and assumptions including
risks discussed under "Risks Associated With Dragon Pharmaceutical" in the
Company's annual report on Form 10-K, SEC File No.: 0- 27937, all of which
are incorporated herein by reference. The Company does not undertake the
obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances.
2