Exhibit 2.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT, dated as of the 18th day of October, 2004
(the "Exchange Agreement"), is by and among Fantatech Inc., a Delaware
corporation (the "Company"), Intsys Share Limited (the "Intsys") (collectively,
the Company and Intsys may be referred to as the "Buyer") and Topforce Asia
Limited, a British Virgin Islands corporation (the "Vendor").
W I T N E S S T H:
WHEREAS, the Company, through its wholly-owned subsidiary, Intsys owns
65.41% equity interest in Shenzhen Digitainment Co., Ltd (the "SDCL"),
representing materially all of the assets currently held by the Company.
WHEREAS, Shenzhen Yongfenguo Investment & Development Co., Ltd
("Yongfenguo"), the holder of 34.59% of SDCL, has recently transferred all of
its 34.59% equity interest in SDCL to Megabase Investment Limited ("Megabase").
WHEREAS, the Vendor owns and has the authority to transfer all of the
equity interest of Megabase, a British Virgin Islands corporation, which is an
intermediate holding company established solely for the purposed of holding the
34.59% equity interest of SDCL. Shares in Megabase are as set forth on Schedule
Item 3.2, attached as Exhibit A hereto this Exchange Agreement (the "Megabase
Shares").
WHEREAS, Buyer desires to acquire from Vendor, and Vendor desire to sell to
the Buyer, the Megabase Shares in exchange (the "Exchange") for the issuance by
the Company of an aggregate of 10,000,000 shares (the "Company Shares") of the
Company's common stock, par value $0.001 per share (the "Company Common Stock")
to be issued to the Vendor and/or its designees, on the terms and conditions set
forth herein.
WHEREAS, the Company, upon recommendation of its independent board of
directors, has determined it is in the best interest of the Buyer to acquire the
remaining 34.59% interest of SDCL under terms agreed to between the Company and
Yongfenguo based, in part, upon the initial purchase of the majority interest of
SDCL by the Company.
WHEREAS, the Company currently has 20,096,117 shares of common stock issued
and outstanding. After giving effect to the Exchange Agreement, the Company
shall have 30,096,117 shares of Common Stock issued and outstanding.
WHEREAS, the Vendor has no relationship with the Buyer.
WHEREAS, the Company has engaged the services of Palisades Capital Group,
LLC. to provide the Company and its independent board of directors with a
"Fairness Opinion" with respect to this Exchange Agreement. The Opinion dated
September 10, 2004 is attached as Exhibit B hereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements set forth herein, the parties hereto
agree as follows:
6
ARTICLE I
EXCHANGE OF SHARES
------------------
1.1 Exchange of Shares. Subject to the terms and conditions of this
Exchange Agreement, on the Closing Date (as hereinafter defined):
(a) the Company shall issue and deliver to the Vendor and/or its designees
the number of authorized shares of Company Common Stock set forth opposite the
Vendor's and its designee's names as set forth on Schedule 1, attached as
Exhibit C hereto, and
(b) the Vendor agrees to deliver to Intsys, the number of issued shares of
Megabase set forth opposite the Vendor's name on Schedule Item 3.2, as attached
as Exhibit A, hereto along with an appropriately executed transfer documents in
favor of Intsys.
1.2 Time and Place of Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Vendor on the date
hereof (the "Closing Date") at 10:00 a.m., it being understood and agreed that
the closing shall be deemed to occur simultaneously with the execution of this
Exchange Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OFTHE COMPANY
--------------------------------------------
The Company represents and warrants to the Vendor that now and/or as of the
Closing:
2.1 Due Organization and Qualification; Subsidiaries; Due Authorization.
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of formation, with full
corporate power and authority to own, lease and operate its respective business
and properties and to carry on its respective business in the places and in the
manner as presently conducted or proposed to be conducted. The Company is in
good standing as a foreign corporation in each jurisdiction in which the
properties owned, leased or operated, or the business conducted, by it requires
such qualification except for any such failure, which when taken together with
all other failures, is not likely to have a material adverse effect on the
business of the Company and its Subsidiaries taken as a whole.
(b) The Company has all requisite corporate power and authority to execute
and deliver this Exchange Agreement, and to consummate the transactions
contemplated hereby and thereby. The Company has taken all corporate action
necessary for the execution and delivery of this Exchange Agreement and the
consummation of the transactions contemplated hereby, and this Exchange
Agreement constitutes the valid and binding obligation of the Buyer, enforceable
against the Company in accordance with its respective terms, except as may be
affected by bankruptcy, insolvency, moratoria or other similar laws affecting
the enforcement of creditors' rights generally and subject to the
qualification that the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefore may be brought.
2.2 No Conflicts or Defaults. The execution and delivery of this Exchange
Agreement by the Buyer and the consummation of the transactions contemplated
hereby do not and shall not (a) contravene the Certificate of Incorporation or
By-laws of the Buyer or (b) with or without the giving of notice or the passage
of time (i) violate, conflict with, or result in a breach of, or a default or
loss of rights under, any material covenant, agreement, mortgage, indenture,
lease, instrument, permit or license to which the Buyer is a party or by which
the Buyer is bound, or any judgment, order or decree, or any law, rule or
regulation to
7
which the Buyer is subject, (ii) result in the creation of, or give any party
the right to create, any lien, charge, encumbrance or any other right or adverse
interest ("Liens") upon any of the assets of the Buyer, (iii) terminate or give
any party the right to terminate, amend, abandon or refuse to perform, any
material agreement, arrangement or commitment to which the Buyer is a party or
by which the Buyer 's assets are bound, or (iv) accelerate or modify, or give
any party the right to accelerate or modify, the time within which, or the terms
under which, the Buyer is to perform any duties or obligations or receive any
rights or benefits under any material agreement, arrangement or commitment to
which it is a party.
2.3 Capitalization. The authorized capital stock of the Company immediately
prior to giving effect to the transactions contemplated hereby consists of
100,000,000 shares of Common Stock par value $0.001 per share, of which
20,096,117, shares are issued and outstanding as of the date hereof and
10,000,000 shares of Preferred Stock, par value $0.001 per share, none of which
are outstanding. All of the outstanding shares of Common Stock are, and the
Company Shares when issued in accordance with the terms hereof, will be, duly
authorized, validly issued, fully paid and non-assessable, and have not been or,
with respect to the Company Shares, will not be issued in violation of any
preemptive right of stockholders. The Company Shares are not subject to any
preemptive or subscription right. There is no outstanding voting trust agreement
or other contract, agreement, arrangement, option, warrant, call, commitment or
other right of any character obligating or entitling the Company to issue, sell,
redeem or repurchase any of its securities, except that there are 4,000,000
shares of common stock share option granted to the officers and certain key
employees of the Company. The granted stock option has a strike price of $0.50,
which was above the market price of $0.40 of the Company's stock on the date of
grant. The 4,000,000 shares stock option is adjusted to 2,000,000 shares due to
the reverse split effective from June 30, 2004. The exercise price is
proportionally adjusted to $1.00, accordingly. The stock option has a vest
period and can be exercised in 50% from January 7, 2007, 80% from January 7,
2008 and in whole from January 7, 2009 until their expiration on January 6,
2014. There is no outstanding security of any kind convertible into or
exchangeable for Common Stock.
2.4 Indebtedness; Contracts; No Defaults. Neither the Company, any
Subsidiary, nor, to the Company's knowledge, any other person or entity is in
breach in any material respect of, or in default in any material respect under,
any material contract, agreement, arrangement, commitment or plan to which the
Buyer is a party, and no event or action has occurred, is pending or is
threatened, which, after the giving of notice, passage of time or otherwise,
would constitute or result in such a material breach or material default by the
Buyer or, to the knowledge of the Company, any other person or entity. The
Company has not received any notice of default under any contract, agreement,
arrangement, commitment or plan to which it is a party, which default has not
been cured to the satisfaction of, or duly waived by, the party claiming such
default on or before the date hereof.
2.5 Compliance with Law. Buyer is not conducting its respective business or
affairs in violation of any applicable federal, state or local law, ordinance,
rule, regulation, court or administrative order, decree or process, or any
requirement of insurance carriers. The Company has not received any notice of
violation or claimed violation of any such law, ordinance, rule, regulation,
order, decree, process or requirement. Buyer is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
the protection of the environment and human health. There are no claims,
notices, actions, suits, hearings, investigations, inquiries or proceedings
pending or, to the knowledge of the Company, threatened against the Company that
are based on or related to any environmental matters or the failure to have any
required environmental permits, and there are no past or present conditions that
the Company has reason to believe are likely to give rise to any material
liability or other obligations of the Company or any Subsidiary under any
environmental laws.
2.6 Permits and Licenses. Buyer has all certificates of occupancy, rights,
permits, certificates, licenses,
8
franchises, approvals and other authorizations as are reasonably necessary to
conduct its respective business and to own, lease, use, operate and occupy its
assets, at the places and in the manner now conducted and operated, except those
the absence of which would not materially adversely affect its respective
business. The Company has not received any written or oral notice or claim
pertaining to the failure to obtain any material permit, certificate, license,
approval or other authorization required by any federal, state or local agency
or other regulatory body, the failure of which to obtain would materially and
adversely affect its business.
2.7 Litigation. There is no claim, dispute, action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
or affecting the business of the Buyer, or challenging the validity or propriety
of the transactions contemplated by this Exchange Agreement, at law or in equity
or admiralty or before any federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, nor to the knowledge of
the Company, has any such claim, dispute, action, suit, proceeding or
investigation been pending or threatened, during the 12 month period preceding
the date hereof; (b) there is no outstanding judgment, order, writ, ruling,
injunction, stipulation or decree of any court, arbitrator or federal, state,
local, foreign or other governmental authority, board, agency, commission or
instrumentality, against or materially affecting the business of the Company;
and (c) the Company has not received any written or verbal inquiry from any
federal, state, local, foreign or other governmental authority, board, agency,
commission or instrumentality concerning the possible violation of any law, rule
or regulation or any matter disclosed in respect of its business.
2.8 Brokers. All negotiations relative to this Exchange Agreement and the
transactions contemplated hereby have been carried out by the Company directly
with the Vendor without the intervention of any person on behalf of the Company
in such a manner as to give rise to any valid claim by any person against any
Vendor for a finder's fee, brokerage commission or similar payment.
2.9 Affiliate Transactions. Neither the Company nor any officer, director
or employee of the Company (or any of the relatives or Affiliates of any of the
aforementioned persons) is a party to any agreement, contract, commitment or
transaction with the Buyer or affecting the business of the Company, or has any
interest in any property, whether real, personal or mixed, or tangible or
intangible, used in or necessary to the Company which will subject the Vendor to
any liability or obligation from and after the Closing Date.
2.10 Trading. The Company Common Stock is currently listed for trading on
the OTC Bulletin Board (the "Bulletin Board"), and the Company has received no
notice that its Common Stock is subject to being delisted therefrom.
2.11 Compliance. To the best of its knowledge, the Company and its
shareholders, have complied with all applicable foreign, federal and state laws,
rules and regulations, including, without limitation, the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act of 1933, as amended, is current in its filings.
2.12 Filings. None of the filings made by the Company under the Securities
Act or the Exchange act make any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THEVENDOR
-------------------------------------------
The Vendor represents and warrants to Buyer that now and/or as of the
Closing:
3.1 Due Organization and Qualification; Subsidiaries; Due Authorization.
(a) Megabase is an entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, with full corporate
power and authority to own, lease and operate its respective business and
properties and to carry on its respective business in the places and in the
manner as presently conducted or proposed to be conducted. Megabase is in good
standing as a foreign corporation in each jurisdiction in which the properties
owned, leased or operated, or the business conducted, by it requires such
qualification except for any such failure, which when taken together with all
other failures, is not likely to have a material adverse effect on the business
of Megabase as a whole. The Vendor owns wholly all the outstanding shares of
capital stock of Megabase free and clear of all liens and there is no contract,
agreement, arrangement, option, warrant, call, commitment or other right of any
character obligating or entitling Megabase to issue, sell, redeem or repurchase
any of its securities, and there is no outstanding security of any kind
convertible into or exchangeable for securities of Megabase.
(b) Megabase does not own, directly or indirectly, any capital stock,
equity or interest in any corporation, firm, partnership, joint venture or other
entity, other than those set forth in Item 3.1 of the Schedule attached as
Exhibit A hereto. The 34.59% equity interest in SDCL, as set forth in Item 3.1
of the Schedule, is wholly owned by Megabase free and clear of all liens. There
is no contract, agreement, arrangement, option, warrant, call, commitment or
other right of any character obligating or entitling Megabase to assign,
transfer, sell, redeem or repurchase any of its 34.59% interest in SDCL, and
there is no outstanding security of any kind convertible into or exchangeable
for the aforesaid equity interest in SDCL.
(c) The Vendor has all requisite power and authority to execute and deliver
this Exchange Agreement, and to consummate the transactions contemplated hereby
and thereby. The Vendor has taken all corporate action necessary for the
execution and delivery of this Exchange Agreement and the consummation of the
transactions contemplated hereby, and this Exchange Agreement constitutes the
valid and binding obligation of each of the Vendor, enforceable against the
Vendor in accordance with its terms, except as may be affected by bankruptcy,
insolvency, moratoria or other similar laws affecting the enforcement of
creditors' rights generally and subject to the qualification that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefore may be brought.
3.2 No Conflicts or Defaults. The execution and delivery of this Exchange
Agreement by the Vendor and the consummation of the transactions contemplated
hereby do not and shall not (a) contravene the governing documents of the
Vendor, or (b) with or without the giving of notice or the passage of time, (i)
violate, conflict with, or result in a breach of, or a default or loss of rights
under, any material covenant, agreement, mortgage, indenture, lease, instrument,
permit or license to which the Vendor is a party or by which the Vendor or any
of its respective assets are bound, or any judgment, order or decree, or any
law, rule or regulation to which the Vendor or any of its respective assets are
subject, (ii) result in the creation of, or give any party the right to create,
any lien upon any of the assets of the Vendor, including its interest in
Megabase, (iii) terminate or give any party the right to terminate, amend,
abandon or refuse to perform, any material agreement, arrangement or commitment
to which Vendor or Megabase is a party or by which the Vendor or Megabase or any
of their respective assets are bound, or (iv) accelerate or modify, or give any
party the right to accelerate or modify, the time within which, or the terms
under which the Vendor or Megabase is to perform any duties or obligations or
receive any rights or benefits under any material agreement, arrangement or
commitment to which it is a party.
3.3 Capitalization. The authorized capital stock of Megabase consists of
50,000 ordinary shares of US $0.01 per share of which 100 shares are issued and
outstanding. Set forth in Item 3.2 of the Schedule is a list
10
of all holders of the equity of Megabase, setting forth their names, and
percentage of equity owned. All of the outstanding shares of Megabase Common
Stock are, and the Megabase Shares when transferred in accordance with the terms
hereof, will be, duly authorized, validly issued, fully paid and nonassessable,
and have not been or, with respect to Megabase Shares, will not be transferred
in violation of any rights of third parties. The Megabase Shares are not subject
to any preemptive or subscription right, any voting trust agreement or other
contract, agreement, arrangement, option, warrant, call, commitment or other
right of any character obligating or entitling Megabase to issue, sell, redeem
or repurchase any of its securities, and there is no outstanding security of any
kind convertible into or exchangeable for Common Stock.
3.4 Financial Statements. The Vendor has delivered to the Buyer copies of
the unaudited consolidated balance sheets of Megabase current through Closing
and the related statements of operations, stockholders' equity and cash flows
for the period then ended, including the notes thereto (all such statements
being the "Megabase Financial Statements"). The Financial Statements, together
with the notes thereto, have been prepared in accordance with generally accepted
Hong Kong accounting principles applied on a basis consistent throughout all
periods presented, subject to audit adjustments, which are not expected to be
material. Such statements present fairly the financial position of Megabase as
of the dates and for the periods indicated. The books of account and other
financial records of Megabase have been maintained in accordance with good
business practices.
3.5 Further Financial Matters. Megabase has no material liabilities or
obligations, whether secured or unsecured, accrued, determined, absolute or
contingent, asserted or unasserted or otherwise, which are required to be
reflected or reserved in a balance sheet or the notes thereto under generally
accepted accounting principles, but which are not reflected in the Financial
Statements.
3.6 No Adverse Changes. There has not been (a) any material adverse change
in the business, prospects, the financial or other condition, or the respective
assets or liabilities of Megabase and its 34.59% interest in SDCL as reflected
in the Megabase Financial Statements, (b) any material loss sustained by
Megabase including, but not limited to any loss on account of theft, fire,
flood, explosion, accident or other calamity, whether or not insured, which has
materially and adversely interfered, or may materially and adversely interfere,
with the operation of Megabase' s business, or (c) to the best knowledge of the
Vendor, any event, condition or state of facts, including, without limitation,
the enactment, adoption or promulgation of any law, rule or regulation, the
occurrence of which materially and adversely does or would affect the financial
condition of Megabase.
3.7 Litigation.
(a) There is no claim, dispute, action, suit, proceeding or investigation
pending or, to the knowledge of the Vendor, threatened, against or affecting
Megabase, or challenging the validity or propriety of the transactions
contemplated by this Exchange Agreement, at law or in equity or admiralty or
before any federal, state, local, foreign or other governmental authority,
board, agency, commission or instrumentality, nor to the knowledge of Megabase,
has any such claim, dispute, action, suit, proceeding or investigation been
pending or threatened, during the 12 month period preceding the date hereof;
(b) There is no outstanding judgment, order, writ, ruling, injunction,
stipulation or decree of any court, arbitrator or federal, state, local, foreign
or other governmental authority, board, agency, commission or instrumentality,
against or materially affecting Megabase; and
(c) Megabase has not received any written or verbal inquiry from any
federal, state, local, foreign or other governmental authority, board, agency,
commission or instrumentality concerning the possible violation of any law, rule
or regulation or any matter disclosed in respect of its business.
11
3.8 Patents; Trademarks and Intellectual Property Rights. Megabase does not
own or possesses any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, internet web site(s)
proprietary rights of any nature. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing, and Megabase is not bounded
by, or a party to, any options, licenses or agreements of any kind with respect
to the patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, proprietary rights nor processes of any other
person or entity.
3.9 Brokers. All negotiations relative to this Exchange Agreement and the
transactions contemplated hereby have been carried out by the Vendor directly
with the Buyer without the intervention of any Person on behalf of the Vendor in
such a manner as to give rise to any valid claim by any Person against any party
for a finder's fee, brokerage commission or similar payment.
3.10 Investment.
(a) The Vendor (which should represent and include each of its designee) is
acquiring the Company Shares for investment for its own account and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and such the Vendor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Vendor further
represents that there is no contract, undertaking, agreement or arrangement of
any kind with any person to sell, transfer or grant participation to such person
or to any third person, with respect to any of the Company Shares.
(b) The Vendor (which should represent and include each of its designee)
understands that the Company Shares are not registered under the Act on the
ground that the sale and the issuance of securities hereunder is exempt from
registration under the Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on such Vendor's
representations set forth herein. Such Vendor is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D under the Act.
(c) The Vendor (which should represent and include each of its designee)
represents that it has no present intention to participate the management of the
Company or Intsys and there is no agreement or arrangement of any kind among its
designees to act collectively or in concert in exercising the rights associated
with the Company Shares.
3.11 Investment Experience. The Vendor (which should represent and include
each of its designee) acknowledges that it can bear the economic risk of its
investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Company Shares.
3.12 Information. The Vendor has carefully reviewed such information as
deemed necessary to evaluate an investment in the Company Shares. To the full
satisfaction of the Vendor, it has been furnished all materials that it has
requested relating to the Company and the issuance of the Company Shares
hereunder, and the Vendor has been afforded the opportunity to ask questions of
representatives of the Buyer to obtain any information necessary to verify the
accuracy of any representations or information made or given to the Vendor.
Notwithstanding the foregoing, nothing herein shall derogate from or otherwise
modify the representations and warranties of the Company set forth in this
Exchange Agreement, on which the Vendor has relied in making an exchange of the
Megabase Shares for the Company Shares.
3.13 Restricted Securities. The Vendor (which should represent and include
each of its designee) understands that the Company Shares may not be sold,
transferred, or otherwise disposed of without registration under the Act or an
exemption there from, and that in the absence of an effective registration
12
statement covering the Company Shares or any available exemption from
registration under the Act, the Company Shares must be held indefinitely. The
Vendor is aware that the Company Shares may not be sold pursuant to Rule 144
promulgated under the Act unless all of the conditions of that Rule are met.
Among the conditions for use of Rule 144 may be the availability of current
information to the public about the Company.
ARTICLE IV
INDEMNIFICATION
---------------
4.1 Indemnity of the Company. The Company agrees to defend, indemnify and
hold harmless the Vendor from and against, and to reimburse the Vendor with
respect to, all liabilities, losses, costs and expenses, including, without
limitation, reasonable attorneys' fees and disbursements (collectively the
"Losses") asserted against or incurred by such Vendor by reason of, arising out
of, or in connection with any material breach of any representation or warranty
contained in this Exchange Agreement made by the Buyer or in any document or
certificate delivered by the Buyer pursuant to the provisions of this Exchange
Agreement or in connection with the transactions contemplated thereby.
4.2 Indemnity of the Vendor. The Vendor agrees to defend, indemnify and
hold harmless the Buyer from and against, and to reimburse the Buyer with
respect to, all liabilities, losses, costs and expenses, including, without
limitation, reasonable attorneys' fees and disbursements, asserted against or
incurred by the Buyer by reason of, arising out of, or in connection with any
material breach of any representation or warranty contained in this Exchange
Agreement and made by the Vendor or in any document or certificate delivered by
the Vendor pursuant to the provisions of this Exchange Agreement or in
connection with the transactions contemplated thereby, it being understood that
the Vendor shall have responsibility hereunder only for the representations and
warranties made by the Vendor. All claims to be asserted hereunder must be made
by the first anniversary of the Closing.
4.3 Indemnification Procedure. A party (an "Indemnified Party") seeking
indemnification shall give prompt notice to the other party (the "Indemnifying
Party") of any claim for indemnification arising under this Article 4. The
Indemnifying Party shall have the right to assume and to control the defense of
any such claim with counsel reasonably acceptable to such Indemnified Party, at
the Indemnifying Party's own cost and expense, including the cost and expense of
reasonable attorneys' fees and disbursements in connection with such defense, in
which event the Indemnifying Party shall not be obligated to pay the fees and
disbursements of separate counsel for such in such action. In the event,
however, that such Indemnified Party's legal counsel shall determine that
defenses may be available to such Indemnified Party that are different from or
in addition to those available to the Indemnifying Party, in that there could
reasonably be expected to be a conflict of interest if such Indemnifying Party
and the Indemnified Party have common counsel in any such proceeding, or if the
Indemnified Party has not assumed the defense of the action or proceedings, then
such Indemnifying Party may employ separate counsel to represent or defend such
Indemnified Party, and the Indemnifying Party shall pay the reasonable fees and
disbursements of counsel for such Indemnified Party. No settlement of any such
claim or payment in connection with any such settlement shall be made without
the prior consent of the Indemnifying Party which consent shall not be
unreasonably withheld.
ARTICLE V
DELIVERIES
----------
5.1 Items to be delivered to the Vendor prior to or at Closing by the
Buyer.
13
(a) articles of incorporation and amendments thereto, bylaws and amendments
thereto, certificate of good standing in the Company's state of incorporation;
(b) all applicable schedules hereto;
(c) copies of all SEC filings for the twelve months prior to Closing;
(d) certificates representing 10,000,000 shares of the Company's $0.001
par value Common Stock issued in the denominations as set forth opposite the
respective names of Vendor and/or its designees on Schedule 1 to this Exchange
Agreement, duly authorized, validly issued, fully paid for and non-assessable;
(e) copies of board, resolutions approving this transaction and
authorizing the issuances of the Company Shares;
(f) any other document reasonably requested by the Vendor that it deems
necessary for the consummation of this transaction.
5.2 Items to be delivered to the Company prior to or at Closing by the
Vendor.
(a) articles of incorporation and amendments thereto, bylaws and amendments
thereto, certificate of good standing in the Vendor's region of incorporation;
(b) copies of all governmental filings for the twelve months prior to
Closing;
(c) copies of board resolutions and shareholder vote approving this
transaction and authorizing the issuances of the shares hereto;
(d) all applicable schedules hereto;
(e) instructions or Vendor resolution appointing Buyer's designees to
Megabase's Board of Directors;
(f) documents from the Vendor transferring the all of the equity interests
in Megabase as set forth on
Schedule Item 3.2 of this Exchange Agreement to Intsys;
(g) any other document reasonably requested by the Buyer that it deems
necessary for the consummation of this transaction.
ARTICLE VI
CONDITIONS PRECEDENT
--------------------
6.1 Conditions Precedent to Closing. The obligations of the Parties under
this Exchange Agreement shall be and are subject to fulfillment, prior to or at
the Closing, of each of the following conditions:
(a) That each of the representations and warranties of the Parties
contained herein shall be true and correct at the time of the Closing date as if
such representations and warranties were made at such time; and
(b) That the Parties shall have performed or complied with all agreements,
terms and conditions required by this Exchange Agreement to be performed or
complied with by them prior to or at the time of the Closing.
14
(c) The shares of the Company's Common Stock shall be continued to be
traded on the Bulletin Board.
6.2 Conditions to Obligations of Vendor. The obligations of Vendor shall
be subject to fulfillment prior to or at the Closing, of each of the following
conditions:
(a) The Vendor shall have paid all of the costs and expenses associated
with the Megabase Shares;
(b) As of the Closing, except for the 34.59% equity interest in SDCL,
Megabase shall have no assets and no liabilities whatsoever, contingent or
otherwise;
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Exchange Agreement may be terminated at any time
before or, at Closing, by:
(a) The mutual agreement of the Parties;
(b) Any party if:
(i) Any provision of this Exchange Agreement applicable to a party shall be
materially untrue or fail to be accomplished; or
(ii) Any legal proceeding shall have been instituted or shall be imminently
threatening to delay, restrain or prevent the consummation of this Exchange
Agreement;
(c) Upon termination of this Exchange Agreement for any reason, in
accordance with the terms and conditions set forth in this paragraph, each said
party shall bear all costs and expenses as each party has incurred.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Survival of Representations, Warranties and Agreements. All
representations and warranties and statements made by a party to in this
Exchange Agreement or in any document or certificate delivered pursuant hereto
shall survive the Closing Date for so long as the applicable statute of
limitations shall remain open. Each of the parties hereto is executing and
carrying out the provisions of this Exchange Agreement in reliance upon the
representations, warranties and covenants and agreements contained in this
Exchange Agreement or at the closing of the transactions herein provided for and
not upon any investigation which it might have made or any representations,
warranty, agreement, promise or information, written or oral, made by the other
party or any other person other than as specifically set forth herein.
8.2 Access to Books and Records. During the course of this transaction
through Closing, each party agrees to make available for inspection all
corporate books, records and assets, and otherwise afford to each other and
their respective representatives, reasonable access to all documentation and
other information
15
concerning the business, financial and legal conditions of each other for the
purpose of conducting a due diligence investigation thereof. Such due diligence
investigation shall be for the purpose of satisfying each party as to the
business, financial and legal condition of each other for the purpose of
determining the desirability of consummating the proposed transaction. The
Parties further agree to keep confidential and not use for their own benefit,
except in accordance with this Exchange Agreement any information or
documentation obtained in connection with any such investigation.
8.3 Further Assurances. If, at any time after the Closing, the parties
shall consider or be advised that any further deeds, assignments or assurances
in law or that any other things are necessary, desirable or proper to complete
the merger in accordance with the terms of this Exchange Agreement or to vest,
perfect or confirm, of record or otherwise, the title to any property or rights
of the parties hereto, the Parties agree that their proper officers and
directors shall execute and deliver all such proper deeds, assignments and
assurances in law and do all things necessary, desirable or proper to vest,
perfect or confirm title to such property or rights and otherwise to carry out
the purpose of this Exchange Agreement, and that the proper officers and
directors the parties are fully authorized to take any and all such action.
8.4 Notice. All communications, notices, requests, consents or demands
given or required under this Exchange Agreement shall be in writing and shall be
deemed to have been duly given when delivered to, or received by prepaid
registered or certified mail or recognized overnight courier addressed to, or
upon receipt of a facsimile sent to, the party for whom intended, as follows, or
to such other address or facsimile number as may be furnished by such party by
notice in the manner provided herein:
If to the Company and/or Intsys:
23/F, Huaqiang Bldg A, 3006 Xxxxxxx Xxxx,
Xxxxxxxx 000000, Xxxxx
If to the Vendor:
Suite 2302, Chinachem Hollywood Center
0 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
8.5 Entire Agreement. This Exchange Agreement, the Disclosure Schedule and
any instruments and agreements to be executed pursuant to this Exchange
Agreement, sets forth the entire understanding of the parties hereto with
respect to its subject matter, merges and supersedes all prior and
contemporaneous understandings with respect to its subject matter and may not be
waived or modified, in whole or in part, except by a writing signed by each of
the parties hereto. No waiver of any provision of this Exchange Agreement in any
instance shall be deemed to be a waiver of the same or any other provision in
any other instance. Failure of any party to enforce any provision of this
Exchange Agreement shall not be construed as a waiver of its rights under such
provision.
8.6 Successors and Assigns. This Exchange Agreement shall be binding upon,
enforceable against and inure to the benefit of, the parties hereto and their
respective heirs, administrators, executors, personal representatives,
successors and assigns, and nothing herein is intended to confer any right,
remedy or benefit upon any other person. This Exchange Agreement may not be
assigned by any party hereto except with the prior written consent of the other
parties, which consent shall not be unreasonably withheld.
8.7 Governing Law. This Exchange Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Delaware
are applicable to agreements made and fully to be performed in such state,
without giving effect to conflicts of law principles.
16
8.8 Counterparts. This Exchange Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 Construction. Headings contained in this Exchange Agreement are for
convenience only and shall not be used in the interpretation of this Exchange
Agreement. References herein to Articles, Sections and Exhibits are to the
articles, sections and exhibits, respectively, of this Exchange Agreement. The
Disclosure Schedule is hereby incorporated herein by reference and made a part
of this Exchange Agreement. As used herein, the singular includes the plural,
and the masculine, feminine and neuter gender each includes the others where the
context so indicates.
8.10 Severability. If any provision of this Exchange Agreement is held to
be invalid or unenforceable by a court of competent jurisdiction, this Exchange
Agreement shall be interpreted and enforceable as if such provision were severed
or limited, but only to the extent necessary to render such provision and this
Exchange Agreement enforceable.
17
IN WITNESS WHEREOF, each of the parties hereto has executed this Exchange
Agreement as of the date first set forth above.
FANTATECH INC.
By: /s/ Xxxxxxxx Xxxxx
-----------------------
Chief Executive Officer
INTSYS SHARE LIMITED
By: /s/ Dehou Fang
----------------
Director
TOPFORCE ASIA LIMITED
By: /s/ Zibo Niu
-----------------
President
18
EXHIBIT A
ITEM 3.1
INVESTMENT HELD BY MEGABASE
34.59% equity interest in Shenzhen Digitainment Co., Ltd, a foreign invested
corporation registered and operated in China.
ITEM 3.2
CAPITALIZATION OF MEGABASE
Name of Shareholder Number of Shares Held Percentage of Interest
------------------- --------------------- ----------------------
Topforce Asia Limited 100 100%
19
EXHIBIT B
FAIRNESS OPINION BY PALISADES CAPITAL GROUP, LLC.
20
EXHIBIT C
SCHEDULE 1
Vendor and Designee's Direct/beneficial Number of Company
Name and Address % of Megabase Shares Shares to be issued
------------------------------------ --------------------- -------------------
Vendor
------
Topforce Asia Limited (the "Vendor") 100% (direct) ---
Share Percentage
Designees of Fantatech Inc. Number of Shares
------------------------------------ --------------------- -------------------
FANG XXX XX 0.66% 200,000
AI HUA TIAN 0.33% 100,000
XXXX XX 0.33% 100,000
NGAI XXX XXXX 0.33% 100,000
NEW GALLOP INTERNATIONAL LIMITED 3.32% 1,000,000
PLENTY INVESTMENT LIMITED 3.32% 1,000,000
SUN TIDE INVESTMENT LIMITED 2.33% 700,000
CENTENARY GLOBAL LIMITED 2.66% 800,000
MING XXX XXXXX 0.10% 30,000
DE XXXX XXXXX 2.33% 700,000
DA XXX XX 2.33% 700,000
YI XXX XXXXX 1.00% 300,000
XXXX XXX ZHU 1.40% 420,000
SHI SUN 1.16% 350,000
XXXX XXX WANG 2.19% 660,000
XXX XXXX 4.12% 1,240,000
HAI PING REN 2.33% 700,000
YA XXXXX XXXX 2.99% 900,000
-------------------
Total: 10,000,000
===================
21
