AMENDED AND RESTATED SHARE EXCHANGE AGREEMENT
AMENDED AND RESTATED SHARE EXCHANGE AGREEMENT
This Amended and Restated Share Exchange Agreement (the "Agreement"), dated as of March 17, 2006, is made and entered into among Online Processing, Inc., a Nevada corporation (the “Shell Corp.”), Diguang International Holdings Limited (the "Operating Corp."), a British Virgin Islands corporation, the owners of record of all of the issued and outstanding stock of Operating Corp., as listed in Exhibit A hereto (the “Shareholders”), and Xxxxx Xxxxxxxx (the "Shell Indemnifying Shareholder").
RECITALS
A. The common stock of Shell Corp. is currently traded publicly on the Over the Counter Bulletin Board (the “OTCBB”).
B. In order to enable the Shell Corp., which will wholly-own the Operating Corp. thereafter, to qualify as a publicly listed company to be traded on the NASDAQ National Market in the U.S., the Shareholders have agreed to transfer to Shell Corp., and Shell Corp. has agreed to acquire from the Shareholders, 100% of the common stock of Operating Corp. and their related rights (the “Operating Corp. Stock”) in exchange for 18,250,000 common shares of Shell Corp. and their related rights (the “Shell Corp. Stock”), such that the Shareholders will become the absolute majority shareholders of the Shell Corp., pursuant to the terms and conditions set forth in this Agreement.
C. As a result of the transaction contemplated by this Agreement (the “Share Exchange”), at the Closing of this Agreement (as defined in Section 2), Operating Corp. will become a wholly owned subsidiary of Shell Corp., and Shell Corp. will change its name to Diguang International Development Co., Ltd. (“Diguang International”).
D. On January 10, 2006, Shell Corp. and Operating Corp. entered into a Share Exchange Agreement (the “Original Agreement”) covering the transactions contemplated above, including a proposed redomicile of Shell Corp. to the British Virgin Islands.
E. Subsequent to entering into the Original Agreement, the parties have agreed that the proposed redomicile of Shell Corp. will not occur. As result of this determination and related discussions, the parties wish to amend and restate the Original Agreement in its entirety and replace it with this Agreement.
Now, therefore, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:
1. Exchange of Stock.
(a) The Shareholders agree to transfer to Shell Corp., and Shell Corp. agrees to acquire from the Shareholders, all of the Shareholders' right, title and interest in the Operating Corp. Stock, free and clear of all mortgages, liens, pledges, security interests, restrictions, encumbrances or adverse claims of any nature.
(b) Prior to the Closing, the capital stock of Shell Corp. will have been reversed split on a 3 shares for 5 shares basis (the “Stock Split”), Shell Corp. will have increased its authorized capital by 25,000,000 to have a total of 50,000,000 shares of authorized capital, and Xxxxx Xxxxxxxx will have agreed to cancel and Shell Corp. will have cancelled, 4,967,940, shares (after giving effect to the Stock Split) of common stock of Shell Corp., all in compliance with the laws of the State of Nevada, leaving a total of 1,943,000 shares outstanding. Following the above duly authorized corporate actions, at the Closing, (i)
simultaneously with the surrender by the Shareholders of the certificates or other instruments evidencing the Operating Corp. Stock, duly endorsed for transfer to Shell Corp., Shell Corp. will cause 18,250,000 shares of the Shell Corp. Stock to be issued to the Shareholders (or their designees) and to be delivered to the Shareholders, in full satisfaction of any right or interest which each Shareholder held in the Operating Corp. Stock, each in the amount and proportion set forth next to the Shareholders' respective names in Exhibit A; and (ii) simultaneously with (i) above, Shell Corp. will issue another 2,400,000 shares of common stock for raising US$12,000,000 in gross proceeds (the “Offering”), the date on which Shell Corp. has sold all 2,400,000 shares, unless otherwise agreed by Shell Corp., Chardan Capital Markets, LLC and Maxim Group, LLC (Chardan Capital Markets, LLC and Maxim Group, LLC are collectively referred to as the “Placement Agents”) shall be the “Closing Date.”. All amounts of Shell Corp. stock to be issued to the Shareholders and other investors by Shell Corp. will occur after the Stock Split and cancellation of stock contemplated by this Agreement have been successfully completed.
2. Closing
(a)The parties to this Agreement will hold a closing (the "Closing") for the purpose of executing and exchanging all of the documents contemplated by this Agreement and otherwise effecting the transactions contemplated by this Agreement. The Closing will be held as soon as possible, and it is currently anticipated that it will occur on or before March 31, 2006, at the Law Offices of Xxxxx X. Xxxxxxx, P.C., 000 Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, unless another place or time is mutually agreed upon in writing by the parties. All proceedings to be taken and all documents to be executed and exchanged at the Closing will be taken, delivered and executed simultaneously, and no proceeding will be deemed taken, nor any documents deemed executed or delivered, until all have been taken, delivered and executed. If agreed to by the parties, the Closing may take place through the exchange of documents by fax and/or express courier; provided, however, that any documents received by a party prior to the delivery of all documents required to complete the Closing will be held by the receiving party in trust for the benefit of the delivering party until all documents required to complete the Closing have been exchanged.
(b) With the exception of any stock certificates that must be in their original form, the parties of this Agreement agree that any copy, fax, e-mail or other accurate reproduction of the writing or transmission required by this Agreement or any signature required thereon may be used in lieu of all the copies for the original writing or transmission or signature. The originals will be promptly delivered thereafter.
3. Representations and Warranties of Shell Corp.
Shell Corp. represents and warrants as follows:
(a) Shell Corp. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada in USA and is licensed or qualified in all states in which the nature of its business or the character or ownership of its properties makes such business licensing or qualification necessary.
(b) The authorized capital stock of Shell Corp. consists of (i) 25,000,000 shares of common stock, US$0.001 par value per share but will consist of 50,000,000 shares of common stock as of the Closing, of which 1,943,000 will be issued and remain outstanding as of the Closing and prior to the stock exchange contemplated herein, following the completion of the Stock Split and the cancellation of 4,967,940 shares immediately thereafter as contemplated by Section 7(h). All issued and outstanding shares of Shell Corp.'s common stock are fully authorized, validly issued, fully paid and nonassessable.
(c) Except for the above-described shares of capital stock, there are no outstanding shares of capital stock or other securities or other equity interests of Shell Corp. or rights of any kind to acquire such stock, other securities or other equity interests, except for 2,400,000 shares of common stock to be
issued for raising US$12,000,000 in gross proceeds in connection with, and simultaneously occurring at, the Closing, and 18,250,000 shares of common stock to be issued to the Shareholders at the Closing. No party has any rights to acquire any of the stock of Shell Corp., and there will be no such obligation outstanding at the Closing, except as set forth in Exhibit A.
(d) Shell Corp. has no subsidiaries.
(e) Shell Corp. has the corporate power and authority to enter into this Agreement and to carry out the transactions contemplated herein. Execution and delivery of this Agreement and performance by Shell Corp. hereunder (including issuance of the Shell Corp. Stock) have been duly authorized by all requisite corporate action on the part of Shell Corp., and this Agreement constitutes a valid and binding obligation of Shell Corp., and Shell Corp.’s performance hereunder will not violate any provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree, or any law or regulation, to which any property of Shell Corp. is subject or by which Shell Corp. is bound.
(f) Shell Corp. has minimal assets and liabilities and its liabilities, actual, contingent or otherwise, as of the Closing, other than liabilities incurred in connection with the share exchange or the other activities and transactions contemplated in this Agreement, shall be less than US$30,000.
(g) There is no litigation or proceeding pending or, to Shell Corp.’s knowledge, threatened, against or relating to Shell Corp., its properties or its business.
(h) Shell Corp. is not a party to any material contract, other than contracts entered into with respect to the transactions contemplated in this Agreement. For purposes of Shell Corp. as discussed in this Agreement, “material” shall mean any contract, debt, liability, claim or other obligation valued or otherwise worth US$2,500 or more.
(i) Other than Xxxxx Xxxxxxxx, acting as president and sole director, Shell Corp. has no officers, directors or employees.
(j) Except as set forth on Schedule 3(j) hereto, no current officer, director, affiliate or person known to Shell Corp. to be the record or beneficial owner in excess of 5% of Shell Corp.’s common stock or any person known to be an associate of any of the foregoing is a party adverse to Shell Corp., or has a material interest adverse to Shell Corp. in any material pending legal proceeding.
(k) Shell Corp. has filed properly and timely all federal, state, and other tax returns of every nature required to be filed by it and has paid all taxes and all assessments, fees and charges which it is obligated to pay by federal, state or other taxing authority to the extent that such taxes, assessments, fees and charges have become due. Shell Corp. has also paid all taxes which do not require the filing of returns and which are required to be paid by it. The tax liabilities that have accrued, but have not become payable have been adequately reflected as liabilities in the financial statements of Shell Corp.
(l) The audited financial statements provided to Operating Corp. are made in accordance with U.S. Generally Accepted Accounting Principles (US “GAAP”) and fairly present the financial condition of Shell Corp. in such statements dated as of December 31, 2005.
(m) Shell Corp. has had the opportunity to perform all due diligence investigations of Operating Corp. and its business as Shell Corp. has deemed necessary or appropriate and to ask all questions of the officers and directors of Operating Corp. that Shell Corp. wished to ask, and Shell Corp. has received satisfactory answers to all of its questions regarding the Operating Corp. Shell Corp. has had access to all documents and information about Operating Corp. and has reviewed sufficient information to allow it to make the satisfactory evaluation on the merits and risks of the transactions contemplated by this
Agreement.
(n) Shell Corp. is acquiring the Operating Corp. Shares to be transferred to it under this Agreement for investment and not with a view to the sale or distribution thereof. There are no other agreements purporting to restrict the issuance or transfer of the Shell Corp.’s Shares nor any voting agreements, voting trusts or other arrangements restricting or affecting the voting of the Shell Corp. Shares. The Shell Corp. Shares to be issued to the Shareholders will be duly authorized and validly issued, fully paid and non-assessable by the Shell Corp., and the issuing procedures shall be in full compliance with all US federal and state laws and US Securities and Exchange Commission (“SEC”) rules and regulations.
(o) Since December 31, 2005, Shell Corp. has not experienced or suffered any Material Adverse Effect.
(p) Shell Corp. has not incurred any liabilities, obligations, claims or losses as of the date of this Agreement (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of Shell Corp.’s business or which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect.
(q) As of the date of this Agreement, no event or circumstance has occurred or to the knowledge of Shell Corp. exists with respect to Shell Corp. or its business, properties, operations or financial condition, which has not been disclosed to Operating Corp. in writing or has not otherwise been disclosed in Shell Corp.’s public filings made with the SEC.
(r) Shell Corp. has good and valid title to all of its real and personal property reflected in the Financial Statements, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except to the extent that any such mortgages, pledges, charges, liens, security interests or other encumbrances would not, individually or in the aggregate, cause a Material Adverse Effect. All said leases of Shell Corp. are valid and subsisting and in full force and effect.
(s) The business of Shell Corp. has been and is presently being conducted in accordance with all applicable US federal, state and local governmental laws, rules, regulations and ordinances. Shell Corp. has all franchises, permits, licenses, consents and the regulatory authorizations and approvals required by government necessary for the conduct of its business as now being conducted by it, except to the extent the failure to possess such franchises, permits, licenses, consents and the regulatory authorizations and approvals would not, in the individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(t) Except as set forth on Schedule 3(t) hereto, Shell Corp. has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders' structuring fees, financial advisory fees or other similar fees in connection with this Agreement.
(u) Neither this Agreement nor the Schedules hereto nor any other documents, certificates or instruments furnished to Operating Corp. by or on behalf of Shell Corp. in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.
(v) Shell Corp. owns or possesses the rights to all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations which are necessary for the conduct of its business as now conducted without any conflict with the rights of others.
(w) Shell Corp. has obtained all material approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other person, that are required under any Environmental Laws issued from US Federal and State government. “Environmental Laws” shall mean all applicable laws relating to the protection of the environment including (but not limited to) all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature. To the best of Shell Corp.’s knowledge, Shell Corp. has all necessary governmental approvals required under all Environmental Laws as necessary for Shell Corp.’s business. To the best of Shell Corp.’s knowledge, Shell Corp. is also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws. Except for such instances as would not individually or in the aggregate have a Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting Shell Corp. that violate or may violate any Environmental Law after the Closing or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation．
(x) There are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) Shell Corp., or any of its customers or suppliers and (b) any officer, employee, consultant or director of Shell Corp., or any person owning at least 5% of the outstanding capital stock of Shell Corp. or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder which, in each case, has not been disclosed in writing to Operating Corp.
(y) Shell Corp. has not been the subject of any enforcement or other actions which have questioned its compliance with applicable rules (including without limitation SEC rules and regulations) and the trading rules (OTCBB) since the inception of its trading on the OTCBB in USA. To the best of Shell Corp.’s knowledge, its shares are eligible for trading publicly on the OTCBB as of the date of this agreement. Shell Corp. has received no notice that its common stock is not eligible for quotation and is unaware of any legal encumbrance and contrived encumbrance to suspend, stop or terminate the trading in its shares which could negatively affect its application for being transferred to the Nasdaq National Market in USA, provided all substantive listing criteria are otherwise also met by Operating Corp.’s business.
(z) Shell Corp. is a voluntary filer under Section 15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Shell Corp. files reports with the SEC pursuant to Section 15(d) of the Exchange Act. During the periods which its stock has been publicly traded on the OTCBB, Shell Corp. has duly submitted all documents and filings, which are required by the Nasdaq and/or the SEC in accordance with applicable securities laws, rules and regulations (including without limitation, Section 13(a) or 15(d) of the Exchange Act, the applicable rules and regulations of the SEC promulgated thereunder and the listing requirements of the OTCBB).
(aa) Shell Corp. has filed all reports, schedules, forms and statements required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (the "SEC Documents"). As of their respective dates, none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Shell Corp. included in the SEC Documents were prepared in accordance with US GAAP, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of Shell Corp. and its consolidated subsidiaries and results of their operations and cash flows for the periods covered thereby (subject, in the case of unaudited statements, to normal year-end audit adjustments).
(bb) For the purposes of this Agreement, "Material Adverse Effect" means any adverse effect on the business, operations, properties, prospects, or financial condition of the Shell Corp. on any condition, circumstance, or situation that could result in litigation, claims, disputes or property loss in excess of US$30,000 in the future, and that would prohibit or otherwise materially interfere with the ability of any party to this Agreement to perform any of its obligations under this Agreement in any material respect.
(cc)
Indemnity by Shell Indemnifying Shareholder
For a period of six months following the Closing, the Shell Indemnifying Shareholder will indemnify and hold harmless the Shareholders, Operating Corp., and each of its officers, directors and employees, (the "Shareholder Indemnified Parties"), from any loss, damage, liability, or expense (including, without limitation, expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding against any thereof) incurred or suffered by the Shareholder Indemnified Parties, and arising out of or resulting from (i) a breach of the representations and warranties of Shell Corp. provided in Section 3 hereto, or (ii) any liability, contingent or otherwise, of Shell Corp. before the Closing not otherwise disclosed herein or in the Shell Corp.’s filings made pursuant to the Securities Exchange Act of 1934 (the “SEC Filings”), except to the extent that such breach or liability does not result in a Material Adverse Effect (as defined in paragraph 3(bb)). Notwithstanding anything provided for herein, the Shell Indemnifying Shareholder’s total obligation under this Section 3(cc) shall be limited to and shall not under any circumstances exceed US $700,000.
4. Representations and Warranties of Operating Corp.
Operating Corp. represents and warrants as follows:
(a) Operating Corp. is a corporation duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. Operating Corp. does not have any Subsidiaries or own securities of any kind in any other entity except as set forth on Schedule 4(h) hereto. Operating Corp. and each of its Subsidiaries are non-American corporations and are duly qualified in their respective countries to do business in permissible areas and are in good standing, except for any jurisdiction (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect.
(b) There is no litigation or proceeding pending, or to the Operating Corp.’s knowledge, threatened, against or relating to Operating Corp., its Subsidiaries or to the Operating Corp. Shares or to the shares of each of the Subsidiaries.
(c) The authorized capital stock of Operating Corp. consists of 50,000,000 shares of common stock, US$0.01 par value per share, 12,803,339 shares issued and outstanding as of the date of this Agreement. To the knowledge of Operating Corp., all of its issued and outstanding shares of common stock are fully paid and nonassessable.
(d) There are no outstanding obligations of Operating Corp. or its Subsidiaries to repurchase, redeem or otherwise acquire any of their respective shares, and no party has the right to acquire any shares of Operating Corp, except for the shareholders identified in Exhibit A, and only to the extent set forth in Exhibit A. Except as set forth in this Agreement, the representations set forth herein will be true at the time of the Closing as well.
(e) Execution of this Agreement and performance by Operating Corp. hereunder has been duly authorized by all requisite corporate action on the part of Operating Corp., and this Agreement constitutes a valid and binding obligation of Operating Corp., and Operating Corp.’s performance hereunder will not violate any provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree. Operating Corp. does not violate any law or regulation, by which Operating Corp. is bound.
(f) To the best of Operating Corp.’s knowledge, there is no taxation in the BVI. Operating Corp. has completed all the tax liabilities in its country and all its subsidiaries have paid all taxes that are required to be paid as indicated in the financial audit report as of December 31 2005. The tax liabilities that have accrued but not become payable have been reflected in the financial report provided to Shell Corp.
(g) Operating Corp.'s audited financial statements for the years ended December 31, 2002 through 2005 have been delivered to Shell Corp., are made in accordance with U.S. Generally Accepted Accounting Principles (US “GAAP”) and fairly present the financial condition of Operating Corp. as of the date of such statements.
(h) The basic information of each Subsidiary of Operating Corp. is set forth in Schedule 4(h), in which the place of its incorporation and the authorized capitalization are indicated, together with the amount of the issued and outstanding shares or paid-up capital and the ownership percentage of each of the shareholders. For the purposes of this Agreement, "Subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by Operating Corp. and/or any of its other Subsidiaries. All of the outstanding shares of capital stock and paid-up capital of each Subsidiary have been duly authorized and legally validated and are fully paid and nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither Operating Corp. nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence except as set forth on Schedule 4 (h) hereto. Neither Operating Corp. nor any Subsidiary is party to any agreement, which restricts the voting, or transfer of any shares of the capital stock of any Subsidiary.
(i) Since December 31, 2005, Operating Corp. has not experienced or suffered any Material Adverse Effect.
(j) Except as indicated in the financial statements and those incurred in the ordinary business hereto, neither Operating Corp. nor any of its Subsidiaries has incurred any external liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect.
(k) Except as set forth on Schedule 4(k), starting from December 31, 2005 and ending on the date of the execution of this Agreement, no material event exists with respect to Operating Corp. or its Subsidiaries or their respective businesses, properties, operations or financial condition, which has not been disclosed to in writing as of the date of this Agreement.
(l) Schedule 4(l) hereto sets forth as of the date of the signature hereof all secured and unsecured external Indebtedness of Operating Corp. or any Subsidiary, or for which Operating Corp. or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of US$250,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in Operating Corp.’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of US$100,000 due under leases possibly required to be capitalized in accordance with US GAAP.
(m) Each of Operating Corp. and the Subsidiaries has the right to use all of its real property and the personal property reflected in the Financial Statements, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except to the extent that such mortgages, pledges, charges, liens, security interests or other encumbrances, individually or in the aggregate, do not cause a Material Adverse Effect. All said leases of Operating Corp. and each of its Subsidiaries are valid and subsisting and in full force and effect.
(n) Except as set forth on Schedule 4(n), the business of Operating Corp. and the Subsidiaries has been and is presently being conducted in accordance with all applicable governmental laws, rules, regulations and ordinances. Operating Corp. and each of its Subsidiaries have all permits, licenses, consents and the authorizations and approvals in its country required in the governmental regulations necessary for the conduct of its business as now being conducted by it.
(o) Except as set forth in the Financial Statements, Operating Corp. has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders' structuring fees, financial advisory fees or other similar fees in connection with this Agreement.
(p) To the best of Operating Corp.’s knowledge, neither this Agreement, the Schedules hereto nor any other documents, certificates or instruments furnished to Shell Corp. by or on behalf of Operating Corp. or any Subsidiary in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.
(q) Operating Corp. and each of the Subsidiaries have the rights to the relevant patents that are being assigned by Mr. Song Yi and the trade xxxx (under the name of Diguang Engine) as well as own websites and domain names (whether or not registered), which are necessary for the conduct of its business as now conducted without any conflict with the rights of others.
(r) Except as set forth on Schedule 4(r), Operating Corp. and each of its Subsidiaries are in material compliance with applicable environmental requirements in the operation of their respective business, except to the extent that any non compliance, individually or in the aggregate, does not cause a Material Adverse Effect.
(s) Except as set forth on Schedule 4(s) or incurred or entered into in the ordinary course of business of Operating Corp. and its Subsidiaries, there are no loans, royalty agreements, management contracts or arrangements or other continuing transactions between (a) Operating Corp., any Subsidiary and any of their external customers or suppliers or (b) any officer, employee, consultant or director of Operating Corp., or any of its Subsidiaries, or any person owning at least 5% of the outstanding capital stock of Operating Corp. or any Subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder which, in each case, has not been disclosed in writing to Shell Corp.
(t) Except as set forth on Schedule 4(t), neither Operating Corp. nor any Subsidiary has any collective bargaining arrangements or agreements covering any of its employees, except as set forth on Schedule 4(t) hereto.
(u) Except as set forth on Schedule 4(u), there are no agreements purporting to restrict the transfer of the Operating Corp. Shares, nor any other voting agreements, voting trusts or other arrangements restricting or affecting the voting of the Operating Corp. Shares. The Operating Corp. Shares held by the Shareholders are duly and validly issued, fully paid and non-assessable, and the issuing procedures are in full compliance with all BVI governmental laws, rules and regulations.
(v) Operating Corp. has had the opportunity to perform all due diligence investigations of Shell Corp. and its business that they have deemed necessary or appropriate. Operating Corp. has had access to the documents and information about Shell Corp. and has reviewed sufficient information to allow it to evaluate the merits and risks with Shell Corp. for completing this Agreement.
(w) No current officer, director, affiliate or person known to Operating Corp. to be the record or beneficial owner in excess of 5% of Operating Corp.’s common stock, or any person known to be an associate of any of the foregoing is a party adverse to Operating Corp. or has a material interest adverse to Operating Corp. in any material pending legal proceeding.
(x) For the purposes of “Operating Corp.” of this Agreement, "Material Adverse Effect" means any adverse effect on the business, operations, properties, prospects, or financial condition of either Operating Corp. or its Subsidiaries (if any) and/or on any condition, circumstance, or situation that could result in litigation, claims, disputes or property loss in excess of US$500,000 in the future, and that would prohibit or otherwise materially interfere with the ability of any other party to this Agreement to perform any of its obligations under this Agreement in any material respect.
5. Representations and Warranties of the Shareholders
The Shareholders represent and warrant as follows:
(a) The Shareholders have full right, power and authority to sell, transfer and deliver the Operating Corp. Shares, and simultaneously with delivery of the certificates thereof as contemplated in this Agreement, the Shareholders will transfer to Shell Corp. valid and marketable title to the Operating Corp. Shares, including all voting and other rights to the Operating Corp. Shares free and clear of all pledges, liens, security interests, adverse claims, options, rights of any third party, or other encumbrances. Each of the Shareholders owns and holds that number and percentage of Operating Corp. Shares listed next to their names on Exhibit A, which represent 100% of the issued and outstanding capital stock of Operating Corp.
(b) The communication address of the Shareholders is as listed on Exhibit A, attached hereto.
(c) The Shareholders are acquiring the Shell Corp. Stock for investment and not with a view to the distribution thereof. Therefore, the Shareholders will not sell or otherwise dispose of the Shell Corp. Stock without registration under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption therefrom, and the Shareholders understand that the certificate or certificates representing the Shell Corp. Stock will contain a legend to the foregoing effect.
(d) Shareholders who are not U.S. Persons (as defined in Rule 902 (k) of the Securities Act) understand that the shares of Shell Corp. Stock being exchanged for their shares of Operating Corp. Stock have not been registered under the Securities Act. Shell Corp. is offering the Shell Corp. Stock in a transaction exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated under it. All the shares of Shell Corp. will not be offered or sold in the United States unless registered under the Securities Act or an exemption from registration is available. Further, hedging transactions with regard to the shares may not be conducted unless in compliance with the Securities Act.
(e) The Shareholders of Operating Corp. have complied in all material respects with the “Circular of State Administration of Foreign Exchange on Relevant Issues concerning Foreign Exchange Administration of Financing and Inbound Investment through Offshore Special Purpose Companies by PRC Residents” promulgated by the State Administration of Exchange on October 21, 2005 (the “Circular”).
6. Conduct Prior to the Closing
Shell Corp. and Operating Corp. covenant that between the dates of this Agreement and the Closing as to each of them:
(a) Other than as contemplated in this Agreement, no change will be made in the charter documents, by-laws, or other corporate documents of Shell Corp. or Operating Corp.
(b) Shell Corp., and Operating Corp. will each make its best efforts to maintain and preserve Shell Corp.
and Operating Corp.’s business organization, employee relationships, and goodwill intact, and will not enter into any material commitment except in the ordinary course of business.
(c) In accordance with “Agreement for Sale of Stock” to be signed between and among seller Sino Olympics Industrial Limited (“Sino Olympics”), and the buyers –JLF Partners I, LLC, JLF Partners II, LLC, JLF Offshore Fund, LP, Xxxxx Xxxxxxx and Hilltop Holdings Company, LP (the “Buyers”), immediately before the Closing the Buyers will acquire 259,785, 23,362, 418,406, 87,694 and 87,694 shares, respectively, of Operating Corp. out of Operating Corp.’s 12,803,339 issued and outstanding shares, to be transferred by Sino Olympics for an aggregate amount of US$5,000,000, which the Buyers shall have placed in an escrow account upon the signing of this Agreement and which will be released to Sino Olympics at the Closing. Thereafter, the Buyers will convert the aggregate total of 876,941 shares of Operating Corp. stock into an aggregate total of 1,250,000 shares of Shell Corp. common stock (the “JLF Shares”), to be issued at the Closing, in the amounts indicated in Exhibit A.
(d) Except for the shares listed in Exhibit A, none of the Shareholders will sell, transfer, assign, hypothecate, lien, or otherwise dispose or encumber the Operating Corp. Shares owned by them.
7. Conditions to Obligations of Operating Corp.
Shell Corp. must fulfill each of the following clauses in this Agreement on or before the Closing, unless waived in writing by the Shareholders of Operating Corp.:
(a) The representations and warranties of Shell Corp. set forth herein will be true and correct as of the Closing.
(b) Shell Corp. will have performed all covenants required by this Agreement to be performed by it on or before the Closing.
(c) This Agreement will have been approved by the shareholders and the Board of Directors of Shell Corp. pursuant to properly constituted meetings or by written consent if permitted under applicable corporate law.
(d) Shell Corp. will have delivered to the Shareholders and Operating Corp. the following documents in form and substance reasonably satisfactory to counsel to the Shareholders, to the requirements that:
(i) Shell Corp. is a corporation duly organized, validly existing, and in good standing in the State of Nevada and is legally qualified to take the necessary corporate action to carry out this Agreement.
(ii) Both Shell Corp.'s authorized capital stock and the issued and outstanding shares before and after the Closing are set forth in Schedule 7(d), and supported by the relevant certificate of incorporation and a statement for the issued and outstanding shares from the transfer agent regarding the issued and outstanding shares.
(iii) The board of directors and shareholders (if required) of Shell Corp. have authorized the execution, delivery and performance of this Agreement and the related transactions.
(iv) Any further document as may be reasonably requested by counsel to the Shareholders and Operating Corp. in order to substantiate any of the representations or warranties of Shell Corp. set forth herein.
(v) An indemnification agreement by and among Chardan Capital LLC, the Placement Agents
and the Shareholders, in form and substance satisfactory to Operating Corp. and the Shareholders.
(e) The business and operations of Shell Corp. will have suffered no Material Adverse Effect.
(f) Shell Corp. has provided audited financial statements in accordance with U.S. GAAP ending December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005.
(g)
Shell Corp. has completed the Stock Split.
(h)
Xxxxx Xxxxxxxx has consented to cancel 4,967,940 (following completion of the Stock Split pursuant to Section 7(g)) shares of Shell Corp.’s common stock, and Shell Corp. will have taken action to cancel such shares at the Closing.
(i)
Shell Corp. has increased its authorized capital to 50,000,000 shares of common stock.
(j)
Shell Corp. will have changed its name to Diguang International Development Co., Ltd.
(k)
Shell Corp. will have delivered a legal opinion from Nevada lawyers in form and substance to the satisfaction of counsel to Operating Corp. to the effect that the Stock Split, cancellation, name change and increased authorized capital have been completed, that Shell Corp. has assumed Operating Corp.’s Option Plan (as defined in Section 9(e) below) and all outstanding options issued thereunder, and as to other matters such as due authorization and validity.
(l)
The Placement Agents have raised at least US$12,000,000, of gross proceeds, for which the relevant parties have entered into binding agreements, to acquire 2,400,000 shares of Shell Corp. Stock, the closing of which financing will be held simultaneously with the Closing.
(m)
Shell Corp.'s common stock shall be currently quoted for trading on the OTCBB and Shell Corp. shall have received no notice that its common shares are not eligible for quotation.
(n)
Shell Corp. shall indemnify and hold harmless the Shareholder Indemnified Parties from any loss, damage, liability, or expense (including, without limitation, expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding against any thereof) incurred or suffered by the Shareholder Indemnified Parties, and arising out of or resulting from a breach of the representations and warranties of Shell Corp. provided in Section 3 hereto.
8. Conditions to Obligations of the Shell Corp.
The Operating Corp. must fulfill each of the following clauses in this Agreement on or before the Closing, unless waived in writing by the Shell Corp.:
(a) The representations and warranties of Operating Corp. set forth herein will be true and correct at the Closing.
(b) The Shareholders and Operating Corp. will have performed all covenants required in this Agreement on or before the Closing.
(c) This Agreement will have been approved by the Board of Directors of Operating Corp.
(d) Operating Corp. will have delivered to the Shell Corp. the following documents in form and substance reasonably satisfactory to counsel to the Shell Corp., to the requirements that:
(i) Operating Corp. is a corporation duly organized, validly existing, and in good standing and is legally qualified to take the necessary corporate action to carry out this Agreement.
(ii) Operating Corp.'s authorized capital stock and the issued and outstanding shares are set forth Schedule 8 (d);
(iii)The resolutions of the board of directors and, if necessary, the Shareholders of Operating Corp. to execute this Agreement;
(iv) Any further document as may be reasonably requested by counsel to Shell Corp. in order to substantiate any of the representations or warranties of Operating Corp. set forth herein.
(e) The business and operations of Operating Corp. will have suffered no Material Adverse Effect.
(f) Operating Corp. will have provided audited financial statements in accordance with U.S. GAAP, on a consolidated basis, for its Subsidiaries ending December 31, 2002, December 31, 2003, December 31, 2004, and December 31, 2005.
(g) Before the execution of this Agreement, each of the Buyers or their respective designees will have remitted an aggregate total of US$5,000,000 to Sino Olympics and the Buyers will receive the JLF Shares at Closing in accordance with Section 6(c) above.
(h) The Placement Agents will have raised at least $12,000,000 of gross proceeds, for which the relevant parties will have entered into binding agreements, to acquire 2,400,000 shares of Shell Corp. Stock, the closing of which financing will beheld simultaneously with the Closing of this Agreement.
9. Additional Covenants.
(a) Between the dates of this Agreement and the Closing, both Operating Corp. and Shell Corp. will urge their respective representatives to (i) afford the respective representatives access to the other personnel, properties, contracts, books and records, and other documents and data, as reasonably requested by the other party; (ii) furnish the other parties and their representatives with copies of all such contracts, books and records, and other existing documents and data as they may reasonably request in connection with the transaction contemplated by this Agreement; and (iii) furnish the other parties and their representatives with such additional financial, operating, and other data and information as they may reasonably request. Operating Corp. will provide to Shell Corp. and Shell Corp. will provide to Operating Corp., complete copies of all material contracts and other relevant information on a timely basis in order to keep the other parties fully informed of the status of their respective businesses and operations.
(b) Shell Corp. will deliver all copies of its corporate books, records and all property to Operating Corp. at the Closing.
(c) Except as required by law, the parties to this Agreement agree that they will not make any public announcements relating to this Agreement or the transactions contemplated herein or disclose same to any irrelevant third party without the prior written consent of the other parties. The parties will cooperate in the drafting of a press release and Current Report on Form 8-K to be filed by Shell Corp. with the SEC immediately following the Closing. Nothing in this paragraph shall be construed to prevent Shell Corp. from fulfilling its legal responsibilities to make timely disclosure regarding this Agreement and the transactions contemplated hereby as required by U.S. securities laws.
(d) Xxxxx Xxxxxxxx will resign her position as president and director of Shell Corp. and the board of directors of Shell Corp., following the completion of the transactions of this Agreement, will consist of 5 members, 4 of them to be appointed by the Shareholders and 1 by Chardan Capital, LLC (the “Non-Diguang Member”). The initial term of each director shall be for a period of 18 months. At least three of the directors will qualify as “independent” under NASDAQ criteria, and at least one will qualify as a financial expert.
(e) As part of the Share Exchange, Operating Corp. will adopt a 2006 stock incentive plan (the “Option Plan”). Following the Closing, Shell Corp. will assume the Option Plan and all outstanding options issued thereunder. As assumed, the Option Plan will reserve 1,500,000 shares of Shell Corp.’s common stock, and vesting of granted options shall occur over a period of not less than 3.5 years from the date of an option grant. The parties hereto have agreed that Operating Corp. may issue options equal to 540,000 shares of Shell Corp. to Operating Corp.’s independent directors and certain members of its management prior to the Closing (the “Options”). Other than the Options, Shell Corp. may not issue any further options under the Option Plan prior to 18 months following the Closing without the consent of the non-Diguang Member of the board of directors.
(f) As additional compensation for the stock of Operating Corp. that they have exchanged for Shell Corp. stock, the shareholders of record of Operating Corp. as of 4 weeks prior to the closing of the share exchange, as reflected on Schedule 9(f), will be entitled to receive up to 6,000,000 additional shares (the “Incentive Shares”) if the Operating Corp. achieves the yearly financial performance targets set forth on Schedule 9(f) for the years 2006 through 2009. If the financial performance target(s) for any year are met, all of the Incentive Shares for that year will be issued. If the financial performance target(s) for any year are not met, none of the Incentive Shares for that year will be issued. The determination as to whether the financial performance target(s) has (have) been met and whether the Incentive Shares are issuable shall depend on the financial statements of Shell Corp. audited in accordance with U.S. GAAP as presented in its SEC filings. The Incentive Shares to be issued, if any, will be issued at the same time with such filing. The Incentive Shares will not be registered.
(g) The Shareholders agree that for a period of 18 months from the date of the Closing they will not register for public sale in the United States or any other jurisdiction the shares of Shell Corp. Stock that they will receive as a result of this Agreement. This prohibition will apply to any transferees of the shares described in this Section 9(g), unless such transferees received the shares pursuant to a sale in the market made in compliance with Rule 144 of the Securities Act.
(h) Within 90 days of the Closing Date, Shell Corp., as Diguang International will file a registration statement on Form S-1 (or such other form as available) for the public resale of the shares issued in the Offering and included in the registration rights agreement entered into between Shell Corp. and each investor in the Offering. Diguang International agrees to use its best efforts to have the registration statement declared effective within 180 days of filing or 5 days of the date that it is informed by the SEC staff that (i) the SEC will not review the registration statement or (ii) Diguang International may request the acceleration of the effectiveness of the registration statement and Diguang International makes such request.
10. Termination.
This Agreement may be terminated upon the following occurrence: (1) by mutual consent of the parties in writing; (2) by either Operating Corp. or Shell Corp. if there has been a material misrepresentation or material breach of any warranty or covenant by any party that is not cured by the breaching party within 15 days following notice of such breach or such later date as agreed by the parties; or (3) by either the Shell Corp. or the Shareholders or Operating Corp. if the Closing does not occur by or before March ___,
2006. Following any such termination, Operating Corp. and the Shareholders on the one hand and Shell Corp. and Shell Indemnifying Shareholder on the other hand shall be free to negotiate with other reverse merger candidates and/or conduct other fund raising as it/they deem appropriate and all parties hereby acknowledge and agree that they have no claims against the other parties for such activities.
11. Expenses.
If this transaction does not close or is terminated, each party to this Agreement will pay its respective costs and expenses in connection with the negotiation, preparation and the Closing of this Agreement.
12. Survival of Representations and Warranties.
The representations and warranties of the Shareholders, Operating Corp. and Shell Corp. etc. set out in this Agreement shall survive the consummation of the transactions contemplated herein and remain in full force and effect for a period of 36 months after the Closing.
13. Waiver.
If one party fails to comply with any of the obligations, agreements or conditions, then, the other parties who comply with the same may waive in writing the failure caused by the non-complying party(ies). A waiver of any one provision by any party hereto shall not be deemed to be a continuing waiver of any such provision nor shall it constitute a waiver of any other provision not explicitly waived, and all other provisions herein shall continue in full force and effect notwithstanding any such waiver.
14. Brokers.
The parties agree to indemnify and hold harmless the other parties against any fee, loss, or expense arising out of claims by brokers or finders employed or alleged to have been employed by the indemnifying party, which has not otherwise been disclosed in this Agreement or the schedules hereto.
15. Notices.
All notices and other communications under this Agreement must be in writing and will be deemed to have been given if delivered in person or sent by prepaid first-class certified mail, return receipt requested, or recognized commercial courier service, as follows:
If to Shell Corp. or the Shell Indemnifying Shareholder, to:
Online Processing Inc.
000 Xxxx Xxxxxxxxxx 00, Xxxxx 000,
Xxxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxxx
With a copy, which shall not constitute notice to:
Law Offices of Xxxxx X. Xxxxxxx, P.C.
000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
If to Operating Corp. to：
Diguang International Xxxxxxxx Xxxxxxx
Xxxxx X, 00/X, Xxxx Xxxxx
000 Xxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxx Xxxx
Attn: Xxxx Song/Xxxx Xxx
If to Sino Olympics Industrial Limited, to:
x/x Xx. Xxxx Xx
Xxxxx X, 00/X, Xxxx Xxxxx
000 Xxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxx Xxxx SAR
If to the JLF Parties to:
JLF Asset Management, LLC
0000 Xxx Xx Xx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn:
Xxxxxxx X. Xxxxxxxx
If to Xxxxx Xxxxxxx, to:
00000 Xxxxxx Xxxxxx Xxxx
Xxx Xxxxx, XX
If to Hilltop, to:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
16. General Provisions.
(a) This Agreement will be governed by and under the laws of the State of New York, USA without giving effect to conflicts of law principles. If any provision hereof is found invalid or unenforceable, that part will be amended to achieve as nearly as possible the same effect as the original provision and the remainder of this Agreement will remain in full force and effect.
(b) Any dispute arising under or in any way related to this Agreement will be, in principle, settled through the consultation to be made by the parties. If the agreement cannot be reached through the consultation, the dispute will be submitted to binding arbitration with the American Arbitration Association, in accordance with its rules then in effect. All the parties agree that the arbitration will proceed in San Francisco. The arbitration award will be binding on all the parties and shall be enforceable in any court of competent jurisdiction.
(c) This Agreement constitutes the entire agreement and final understanding of the parties and supersedes and terminates all prior and/or contemporaneous understandings and/or discussions between the parties whether written or verbal, express or implied, relating in any way to the subject matter hereof. This Agreement may not be altered, amended, modified or otherwise changed in any way except by a written agreement, signed by all parties.
(d) This Agreement will inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns.
(e) The parties agree to take any further actions and to execute any further documents, which are necessary or appropriate to carry out the purposes of this Agreement.
(f) The headings of the paragraphs of this Agreement are solely for convenience of reference and will not limit or otherwise affect the meaning of any of the terms or provisions of this Agreement.
(g) This Agreement may be executed in counterparts, each one of which will constitute an original and all of which taken together will constitute one document. This Agreement may be executed by delivery of a signed signature page by fax to the other parties hereto and such fax execution and delivery will be valid in all respects. This Agreement is signed as of February 28, 2006. This Agreement will come into full force and effect following:（i）deposit of US$5,000,000 into the account designated by the shareholders of Sino Olympics Industrial Limited and (ii) infusion of the net proceeds of the US$12,000,000 into the account of Operating Corp. from the aforesaid relevant investors.
The account Numbers are as follows:
1) For Inward Payment
Beneficiary Bank Name:
Beneficiary Bank Address:
Beneficiary Account Name:
Beneficiary Account Number:
Swift Code:
Bank Code:
2) For Inward Payment
Correspondent of Beneficiary's bank:
Swift Code:
Beneficiary Bank Name:
Beneficiary Bank Address:
Beneficiary Account Name:
Beneficiary Account Number:
Swift Code(Hong Kong):
(h)
Although the Original Agreement is drafted in the English and Chinese languages, the parties hereto agree that any disputes regarding the terms and conditions of this Agreement shall be resolved according to the terms of the English language version of this Agreement. The parties have participated jointly, through the use of the English language, in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if it was drafted jointly by the parties in the English language together with reference in the Chinese versions and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
(SIGNATURE PAGE FOLLOWS)
Exhibit A
Shares held by Shareholders of Operating Corp. prior to Closing and shares of Shell Corp. to be held by Shareholders of Operating Corp. after Closing
Shareholders | Percentage & Ownership of Operating Corp. Shares prior to Closing | Nos. of Operating Corp. Shares to be issued to Shareholder or designee(s) prior to Closing | Nos. of Shell Corp. Shares to be held by Shareholders of Operating Corp. after Closing | Shareholder Address |
Sino Olympics Industrial Limited | 93.15% (note 1) | 11,926,398 | 17,000,000 | Suite A, 12/F, Ritz Plaza, 000 Xxxxxx Xxxx Xxxxxxxxxxx, Xxxxxxx, Xxxx Xxxx Attn: Song Yi |
JLF Partners I, LP | 2.02% | 259,785 | 370,300 | 0000 Xxx Xx Xx Xxxxx, Xxxxx 000 Xxx Xxxxx, XX 00000 |
JLF Partners II, LP | 0.18% | 23,362 | 33,300 | 0000 Xxx Xx Xx Xxxxx, Xxxxx 000 Xxx Xxxxx, XX 00000 |
JLF Offshore Fund, Ltd. | 3,27 % | 418,406 | 596,400 | 0000 Xxx Xx Xx Xxxxx, Xxxxx 000 Xxx Xxxxx, XX 00000 |
Xxxxx Xxxxxxx | 0.68% | 87, 694 | 125,000 | 00000 Xxxxxx Xxxxxx Xxxx Xxx Xxxxx, XX 00000 |
Hilltop Holdings Company, LP | 0.68% | 87, 694 | 125,000 | 000 Xxxxxxx Xxxxxx Xxx Xxxx, XX 00000 |
Total: | 100% | 12,803,339 | 18,250,000 | |
Authorized Capital Stock of Operating Corp：50,000,000 shares / Par Value US$0.01 per share.
Issued shares：12,803,339 presently under 100% ownership of Sino Olympics Industrial Limited.
Note 1— It has been agreed by the parties to this Agreement that after Closing, Sino Olympics Industrial Limited can transfer to Dynahero Investments Limited and Sinokosen Investment Limited 1,410,000 of shares of Shell Corp., provided that such transfers are made in accordance with all applicable laws and that the parties receiving them agree to receive them subject to any legal or contractual restrictions on their further transfer, and provided further that as a condition of any such transfers that the transferees also agree to transfer any such shares only in accordance with applicable laws.
Schedule 3(j)
Beneficial Ownership
Chardan Capital, LLC owns 800,000 (11.57%) (on a post-reverse split basis) shares of common stock.
Schedule 3(t)
Brokers & Finders and Other Similar Fees
1. Chardan Capital Markets, LLC
2. Maxim Group, LLC
·
Placement Agent fee to Chardan Capital Markets, LLC and Maxim Group LLC, equal to 8% of the total proceeds raised in the Offering as committed under the subscription agreements. In addition, the Placement Agents will receive a monthly fee of $5,000 payable on the 1st day of each month during the term of the Placement Agent Agreement. The term of the Placement Agent Agreement, which began on September 27, 2005, is 24 months.
3.
TriPoint Capital Advisors, LLC
·
Consultant fee of $40,000 upon completion of the financing.
Schedule 4(h)
Operating Corp. Subsidiaries
Name of Subsidiary | Registered Address | Name of Shareholders/Share Nos./Registered Capital or Authorized Capital B.V.I. | Types of Subsidiaries |
Shenzhen Diguang Electronics Co. Ltd | 8/F,64 Bldg, Jinlong Industry District Majialong, Nanshan District Shenzhen China | Diguang International Holdings Limited /15,000,000RMB Hong Kong (100%) | P.R. China |
Well Planner Limited | 10/F 000 Xxxxxx Xxxx Xxxxxxx Xxxxxxx, Xxxx Xxxx | Diguang International Holdings Limited /10 shares (100%) | Hong Kong |
Diguang Science & Technology (HK) Ltd | Commonwealth Trust Limited, Drake Chambers, Tortola, British Virgin Islands | Diguang International Holdings Limited /50,000 shares (100%) | B.V.I. |
Schedule 4(k)
Material Events
Please disclose any events or circumstances that have occurred since December 31, 2005 or exist with respect to Diguang or its Subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which has not been disclosed to OLPC in writing as of the date of this Agreement (if any).
All events and circumstances that have occurred since December 31, 2005 have been disclosed pursuant to Shell Corp.’s legal due diligence, operational due diligence and Diguang’s audit report. There will be an increase of registered capital from RMB 15,000,000 to RMB 35,000,000 and total investment capital of Shenzhen Diguang from RMB15,000,000 to RMB70,000,000 respectively, which has been approved by the board of directors and the shareholders and the purchase of an office building in Shenzhen, which was approved by the board resolution of Shenzhen Diguang on December 12, 2005. This one floor of office building, located at Shennan Avenue, covers 1,225 and 45/100 square meters. The total purchase price is RMB15,369,000, which has been paid, out of which a deposit of RMB800,000 was paid in 2005.
Schedule 4(l)
Indebtedness
Please disclose (if any and as of the date of this agreement and for Diguang International Holdings and all subsidiaries) all outstanding secured and unsecured debt:
1. Liabilities for borrowed money or amounts owed in excess of US$250,000 (other than trade accounts payable incurred in the ordinary course of business).
None.
2. Guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in Operating Corp.’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business.
None.
3. Present value of any lease payments in excess of US$100,000 due under leases required to be capitalized in accordance with GAAP.
None.
Schedule 4(n)
Please list any applicable laws, rules, regulations and ordinances that Diguang or its subsidiaries are not in compliance with and that can cause a Material Adverse Effect (if any), including Environmental Laws.
Operating Corp. and each of its Subsidiaries are in material compliance with the Chinese environmental requirements in the operation of their respective business, except to the extent that any non compliance, individually or in the aggregate, do not cause a Material Adverse Effect.
Schedule 4(r)
Authorizations and Approvals
Please list any necessary government approvals, authorizations, certificates, consents, licenses, orders, permits or other similar authorizations relating to Environmental laws that Diguang International Holdings or its subsidiaries has failed to obtain (if any).
Save for the Environmental Acceptance Documents for Completion of Construction Project and Contamination Discharge Certificate of Dongguan City, which is still under application and is expected to be issued in due course, Shenzhen Diguang has obtained all necessary permits or licenses for its operation activity.
Schedule 4(s)
Related Party Contracts
Please list any material loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions (if any) between:
1.
Diguang International Holdings, any Subsidiary or any of their respective customers or suppliers; or
2.
Any officer, employee, consultant or director of Diguang International Holdings or any of its Subsidiaries, or any person owning at least 5% of the outstanding capital stock of Diguang International Holdings or any Subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder which, in each case, has not been disclosed in writing to OLPC
Shell Corp. will enter into employment agreements with each of Song Yi and Song Hong, which will be effective upon the Closing. The drafting of these employment agreements is in process and such agreements will be entered into prior to Closing.
Except for the newly acquired office disclosed above in Schedule 4(k), Diguang and its Well Planner and Diguang Science subsidiaries do not own or lease any property. Its subsidiary, Shenzhen Diguang, is headquartered in Shenzhen with a leased office that houses management, research and development personnel, marketing, finance and administrative support staff. This lease will expire in January 2006, and management has renewed the current lease for next year or move to the new space in Shenzhen for the further development of the Company.
In 2005 Shenzhen Diguang entered into a lease on a new property in Dongguan, China that includes a large manufacturing facility, research and development operations, offices and employee dormitories, and basketball and football courses. The initial term of the lease on this facility will expire on January 31, 2010, but an option to extend the lease for an additional five years at market rates is under negotiation.
Diguang signs supply and purchase contracts (Purchase Orders) with its suppliers and customers including Non-disclosure Agreements.
Schedule 4(t)
Agreements Relating to Employees
See Schedule 4(s) regarding the employment agreements for Song Yi and Song Hong.
Schedule 4(u)
Operating Corp. Shares
Prior to issuance of shares to the Buyers, and to Dynahero Investments Limited and Sinokosen Investment Limited, all the outstanding securities of Diguang International Holdings Limited are common shares and are currently held and controlled 100% by Sino Olympics Industrial Limited, with shareholders Song Yi (80%) and Song Hong (20%). Except as contemplated in the Agreement, no other party will acquire any stock of Operating Corp. before the Closing.
Schedule 7(d)
Capitalization of Shell Corp.
Shell Corp. has 25,000,000 shares of authorized common stock and 11,518,233 shares of common stock issued and outstanding. After Xxxxx Xxxxxxxx returns her 4,967,940 shares to us and the Stock Split takes effect, Shell Corp. will have 1,943,000 shares of common stock issued and outstanding.
After Closing Shell Corp. will have 22,593,000 shares of common stock issued and outstanding and 50,000,000 shares of authorized capital.
Schedule 8(d)
Capitalization of Operating Corp.
Authorized Capital Stock of Operating Corp：50,000,000 shares / Par Value US$0.01 per share.
Issued shares：12,803,339 presently owned as set forth on Exhibit A of this Agreement.
Schedule 9(f)
Incentive Shares
Shareholders of record of Operating Corp. as of 4 weeks prior to the Closing
Sino Olympics Industrial Limited
Total Incentive Shares | 2006 | 2007 | 2008 | 2009 | |
6,000,000 | 500,000 | 1,500,000 | 2,000,000 | 2,000,000 | |
After-tax profit targets (1) | US$15,700,000 | US$22,800,000 | US$ 31,900,000 | US$43,100,000 |
(1) After-tax profit targets shall be the income from operations, less taxes paid or payable with regard to such income, excluding the effect on income from operations, if any, resulting from issuance of Incentive Shares in any year. By way of example, if the Incentive Shares for 2006 are earned and issued in 2007 with an aggregate value of $7 million, and as a result the income from operations for 2007 is reduced by $7 million, the determination of whether the after-tax profit targets are hit for 2007 will be made without deducting the $7 million from income from operations. That is, if income from operations was $20 million after the charge for issuance of the Incentive Shares, for purposes of issuance of Incentive Shares for 2007, income from operations will be deemed to be $27 million, and whether the target is hit will be determined by deducting from $27 million the amount of taxes that would have been paid or payable had income from operations actually been $27 million.
