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 29, 2010
(Exact
name of registrant as specified in Charter)
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Nevada
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000-51379
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51-0539830
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(State
of Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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Guangri
Tower, Suite 702
No. 8
Siyou South 1st Street
Yuexiu
District
Guangzhou,
China 510600
(Address
of registrant’s principal executive office)
(8620)
8739-1718 and (8620) 8737-8212
(Registrant’s
telephone number, including area code)
Check the
appropriate box below in the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.
14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 1.01
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Entry
into a Material Definitive
Agreement.
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On
January 29, 2010, China Medicine Corporation (“we”, “us” or the “Company”)
completed the sale of 4,000,000 shares ( the “Investor Common Shares”) of our
common stock, par value $.0001 per share (“Common Stock”) at $3.00 per share and
1,920,000 shares (the “Investor Preferred Shares”, together with the Investor
Common Shares, the “Investor Shares”) of our redeemable convertible preferred
stock, par value $.0001 per share (“Redeemable Convertible Preferred Stock”) at
$30.00 per share, (the “Financing”), resulting in gross proceeds to the Company
of $69,600,000 and net proceeds (after all expenses of the Financing) of
approximately $66,500,000.
The sale
was completed pursuant to a Stock Subscription Agreement (the
“Subscription Agreement”), dated December 31, 2009, among the Company, OEP CHME
Holdings, LLC, a Delaware limited liability company (the “Investor”), and
Senshan Yang (the “Executive Shareholder), our chief executive officer and
Chairman of our board of directors (the “Board”). The terms and
conditions of the Subscription Agreement are discussed in detail in our Current
Report on Form 8-K filed with the Securities and Exchange Commission (the
“Commission”) on January 7, 2010, and the foregoing description of the terms of
the Subscription Agreement is qualified in their entirety by reference to the
provisions of the Subscription Agreement, which is included as an exhibit to
such Current Report on Form 8-K, and are incorporated herein by
reference.
Pursuant
to the Subscription Agreement, the following instruments or agreements (together
with the Subscription Agreement and the Shareholders Agreement, the “Transaction
Documents”) were executed at the Closing: Escrow Agreement,
Certificate of Designation, Rights and Preferences, and Pledge
Agreement.
Each of
the Transaction Documents, other than the Subscription Agreement, is briefly
summarized below:
Shareholders
Agreement
Simultaneously
with the entry into the Subscription Agreement, the Investor, the Executive
Shareholder, Minhua Liu, our Executive Vice-President, and Junhua Liu (each, an
“Executive” and together with the Executive Shareholder, the
“Executives”) entered into a Shareholders Agreement (the “Shareholders
Agreement”). The Shareholders Agreement contains various provisions
governing rights of the Executives and the Investor in the event that the
Investor or any of the Executives determines to sell shares.
In
addition, the Shareholders Agreement provides that as long as the Investor owns
at least 10% of the issued and outstanding Common Stock on a fully diluted basis
at the time of determination, the Board shall (unless otherwise
agreed by the Investor) be constituted to consist of seven members, of whom the
Executive Shareholder shall be one nominee, the Investor and the Executive
Shareholder shall each have the right to nominate one individual reasonably
acceptable to the other, and the Investor will have the right to
nominate four independent directors reasonably acceptable to the
Executive Shareholder. In addition, during any period prior to the
establishment of a seven member Board and so long as the Investor owns at least
10% of the issued and outstanding Common Stock on a fully diluted basis at the
time of determination, the Investor shall have certain information rights,
rights with respect to Board meetings and committees, and its consent shall be
required for certain significant Board actions.
Escrow
Agreement
On
January 29, 2010, concurrently with the closing of the Financing (the “Closing”)
and pursuant to the Subscription Agreement, we entered into an Escrow Agreement
(the “Escrow Agreement”) with Investor and JPMorgan Chase Bank, N.A. (the “
Escrow Agent”). At the Closing, $57,600,000 (the “Escrow Funds”) was
deposited with the Escrow Agent in accordance with the Escrow
Agreement. Under the Escrow Agreement, the Escrow Funds will be
disbursed to us to fund certain specified acquisitions and capital expenditures,
as well as other potential acquisitions and expenditures, provided that our
Board has approved such acquisition or expenditure and joint written
instructions are provided to the Escrow Agent by the Investor and the
Company. The Escrow Funds also secure our indemnification obligations
under the Subscription Agreement.
The
Escrow Agreement may be terminated by either party after 28 months if it has not
otherwise been terminated in accordance with its terms. At termination the
remaining Escrow Funds shall be distributed to us, except that if before that
time one of the events specified in the Subscription Agreement occurs which
requires the Company to redeem any Investor Preferred Shares, the Investor shall
have the right to require the Escrow Agent to disburse to the Investor all or a
portion of the Escrow Funds as payment for the redeemed Investor Preferred
Shares.
Certificate
of Designation
On
January 26, 2010, we filed with the Nevada Secretary of State a Certificate of
Designation, Rights and Preferences (the “Certificate of Designation”) relating
to the Redeemable Convertible Preferred Stock. The Certificate of
Designation provides that each share of Redeemable Convertible Preferred Stock
is convertible into a number of shares of Common Stock determined by dividing
$30 by the conversion price (initially $3.00, subject to certain adjustments),
i.e. each share of Redeemable Convertible Preferred Stock is initially
convertible into ten shares of Common Stock. In addition, each share
of Redeemable Convertible Preferred Stock shall be entitled to receive dividends
and shall have voting rights based on the number of shares of Common Stock into
which such share is convertible. The Certificate of Designations also
specifies circumstances in which the Redeemable Convertible Preferred Stock is
mandatorily redeemable.
The
foregoing description of the Certificate of Designation does not purport to be
complete and is qualified in its entirety by reference to the Certificate of
Designation which is attached as Exhibit 3.1, to this Current Report on Form
8-K.
Pledge
Agreement
Pursuant
to the Subscription Agreement, at the Closing, the Executive Shareholder entered
into a Pledge Agreement with the Investor pursuant to which the Executive
Shareholder pledged all of his equity interests in our company to secure his and
our indemnification obligations under the Subscription
Agreement.
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Item
3.02
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Unregistered
Sales of Equity Securities.
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On
January 29, 2010, upon the Closing, we issued the Investor Shares, as described
under Item 1.01 above, which description is hereby incorporated by reference
into this Item 3.02.
The
Investor Shares were issued under the Subscription Agreement in reliance on
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
thereunder as a transaction not involving any public offering. No advertising or
general solicitation was employed in offering the securities under the
Subscription Agreement, the offering and sale was made to one person and the
Company will restrict transfer of the securities purchased under the
Subscription Agreement, in accordance with the requirements of the Securities
Act of 1933, as amended. Appropriate legends have been affixed to the
certificates for the Investor Shares.
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Item
3.03
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Material
Modification to Rights of Security
Holders.
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On
January 26, 2010, we filed the Certificate of Designation with the Nevada
Secretary of State, as described under Item 1.01 above, which description is
hereby incorporated by reference into this Item 3.03.
Each
share of Redeemable Convertible Preferred Stock shall be entitled to receive
dividends and shall have voting rights based on the number of shares of Common
Stock into which such share is convertible.
The
Certificate of Designation provides that each share of Redeemable Convertible
Preferred Stock is convertible into a number of shares of Common Stock
determined by dividing $30 by the conversion price (initially $3.00, subject to
certain adjustments), i.e. each share of Redeemable Convertible Preferred Stock
is initially convertible into ten shares of Common Stock. In addition, if the
Investor, has requested and has received a return of any portion of the Escrow
Funds pursuant to the Subscription Agreement, we shall redeem a number of shares
of Redeemable Convertible Preferred Stock equal to the amount of the Escrow
Funds received by the Investor divided by a redemption price calculated pursuant
to the Certificate of Designation.
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Item 5.01
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Changes
in Control of Registrant.
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The
information under Items 1.01 and 3.02 of this Current Report on Form 8-K is
incorporated by reference into this Item 5.01.
As a
result of the Closing, the Investor acquired approximately 54% of our issued and
outstanding shares of common stock, on a fully-diluted basis, thereby obtaining
voting control of the Company. The purchase price was funded by
equity contributions to the Investor made by OEP III, OEP III Co-Investors L.P.
and OEP II Partners Co-Invest L.P., which are the three members of the
Investor.
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Item 5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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On
January 29, 2010, in connection with the Financing and pursuant to the terms of
the Shareholders Agreement, upon receipt of a deferral request from the
Investor, we increased the size of the Board from five directors to six
directors. Effective as of the Closing, Ryan Shih was appointed to
the Board. Mr. Shih’s biography is set forth below:
Ryan J. Shih, Member of the Board of
Directors. Ryan J. Shih, 36 years old, has served as a
director of the Company since January 29, 2010. Since 2008, Mr. Shih,
has been a partner in the Hong Kong office of One Equity Partners (“OEP”), the
global private equity investment arm of JPMorgan Chase &
Co. Prior to joining OEP, Mr. Shih was an investment banker at both
Merrill Lynch from 2006 to 2008 and Deutsche Bank from 2004 to 2006 covering the
semiconductor, alternative energy, media, and hardware sectors throughout the
Asia-Pacific region. Prior to serving as an investment banker, Mr. Shih was an
attorney at Skadden Arps. Prior to his legal and financial career,
Mr. Shih was a captain in the United States Army. Mr. Shih holds a
B.S. in Aerospace/Mechanical Engineering from the United States Military Academy
at West Point, New York and a J.D. from Stanford Law School.
On
February 2, 2010, the Company issued a press release announcing the Closing. A
copy of the press release is attached hereto as Exhibit 99.1 and is incorporated
herein by reference.
The
information contained in this Item 8.01 and in the accompanying exhibits is
being furnished pursuant to “Item 8.01. Other Events.” The
information contained under this Item 8.01 and in the accompanying exhibit 99.1
shall not be incorporated by reference into any of our filings, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing, unless expressly incorporated by specific reference to
such filing. The information under this Item 8.01, including the exhibit 99.1
hereto, shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section or Sections 11 and 12(a)(2) of the Securities
Act.
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Item
9.01
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Financial
Statements and Exhibits
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(d)
Exhibits
The
exhibits required by this item are listed on the Exhibit Index to this
report.
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.
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CHINA
MEDICINE CORPORATION
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By:
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/s/ Senshan
Yang
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Name:
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Senshan
Yang
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Title:
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Chief
Executive Officer
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Date:
February 2, 2010
Exhibit Index
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Exhibit Number
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Description
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3.1
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Certificate
of Designation, Rights and Preferences, Redeemable Convertible Preferred
Stock
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99.1
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Press
Release of China Medicine Corporation, February 2,
2010
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