STOCK OPTION AGREEMENT
Stock
Option Agreement (the
“Agreement”)
dated
as of June 29, 2007 by and among Yuan Xxxx Xx and Xxxx Xxxx as “Sellers”
and
Warner Technology & Investment Corp. as “Purchaser.”
Each
of
the Purchaser and Sellers
is
referred to herein individually as a “Party”
and
all
are referred to collectively as the “Parties.”
PREAMBLE
WHEREAS,
the
Sellers are the holders of record and beneficial owners of a total of 12,600,000
shares of common stock (the “OptionOption
Shares”)
of
China Software Technology Group Co., Ltd. (“CSWT”),
and
the Purchaser is associated with American Wenshen Steel Group, Inc.
(“AWSG”);
and
WHEREAS,
CSWT
and AWSG have determined that a business combination between them is advisable
and are on this date entering into a Merger Agreement (the “Merger
Agreement”)
that
contemplates the merger of AWSG into a subsidiary of CSWT; and
WHEREAS,
the
Purchaser wishes to purchase and the Sellers wish to sell an option to acquire
the Option Option Shares, on the terms and subject to the conditions set forth
herein.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants, representations and
warranties contained herein, the Parties, intending to be legally bound, hereby
agree as follows:
CERTAIN
DEFINITIONS
As
used
in this Agreement, the following terms shall have the meanings set forth below:
“Applicable
Law”
means
any domestic or foreign law, statute, regulation, rule, policy, guideline or
ordinance applicable to the businesses of the Parties or the Merger.
“DGCL”
means
Delaware General Corporation Law.
“Knowledge”
means a
particular fact or other matter of which the Party is actually aware or which
a
prudent individual would be expected to discover or otherwise become aware
of in
the course of conducting a review
or
investigation
that is
reasonable under the present circumstances.
“Lien”
means,
with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest, claim, encumbrance, royalty interest, any other adverse
claim
of any kind in respect of such property or asset, or any other restrictions
or
limitations of any nature whatsoever.
“Material
Adverse Effect”
with
respect to any entity or group of entities means any event, change or effect
that has or would have a materially adverse effect on the financial condition,
business or results of operations of such entity or group of entities, taken
as
a whole.
“Person”
means
any individual, corporation, partnership, trust or unincorporated organization
or a government or any agency or political subdivision thereof.
“Tax”
(and,
with correlative meaning, “Taxes”
and
“Taxable”)
means:
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(i)
any
income, alternative or add-on minimum tax, gross receipts tax, sales tax, use
tax, ad valorem tax, transfer tax, franchise tax, profits tax, license tax,
withholding tax, payroll tax, employment tax, excise tax, severance tax, stamp
tax, occupation tax, property tax, environmental or windfall profit tax, custom,
duty or other tax, impost, levy, governmental fee or other like assessment
or
charge of any kind whatsoever together with any interest or any penalty,
addition to tax or additional amount imposed with respect thereto by any
governmental or Tax authority responsible for the imposition of any such tax
(domestic or foreign), and
(ii)
any
liability for the payment of any amounts of the type described in clause (i)
above as a result of being a member of an affiliated, consolidated, combined
or
unitary group for any Taxable period, and
(iii)
any
liability for the payment of any amounts of the type described in clauses (i)
or
(ii) above as a result of any express or implied obligation to indemnify any
other person.
“Tax
Return”
means
any return, declaration, form, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
ARTICLE
I
THE
OPTION
SECTION
1.01 ESTABLISHMENT
OF THE OPTION
(a) On
the
Closing Date of the Merger Agreement, the Purchaser shall purchase the Option
Shares from the Sellers for cash consideration of Five Hundred Seventy Thousand
Dollars ($570,000) (the “Option
Purchase Price”).
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(b) On
the
Closing Date of the Merger Agreement, the Sellers will deliver certificates
for
the Option Shares to Xxxxxx Xxxxxx, Esq. (the “Escrow
Agent”)
along
with stock powers endorsed in blank with a medallion signature guarantee. The
Escrow Agent is instructed to hold the said documents until (a) the Option
Closing, at which time he will deliver the documents to Warner or (b) the
expiration of the Option Period, at which time he will deliver the documents
to
the Shareholder.
(c)
The
Sellers hereby grant to the Purchaser an irrevocable option (the “Option”) to
purchase the Option Shares for the purchase price of Thirty Thousand Dollars
($30,000) (the “Purchase Price”) at any time during the period commencing on the
date which is 90 days after the closing of the Merger and ending six months
from
the date of such closing (“Option Period”). The Purchaser may exercise the
Option at any time during the Option Period by (a) giving notice of exercise,
in
writing, to the Sellers accompanied by a personal check or wire transfer for
the
Purchase Price and (b) giving documentary evidence to the Escrow Agent of
payment of the Purchase Price to the Sellers.
SECTION
1.02 CLOSING.
(a) Upon
receipt of the documentary evidence described in Section 1.01(c) above, the
Escrow Agent shall deliver the certificates for the Shares and the stock powers
to the Purchaser (the “Option Closing”).
(b) The
Parties intend that the sale of the OptionOption Shares shall be exempt from
the
registration requirements of the Securities Act pursuant to Section 4(2) of
the
Securities Act and the rules and regulations promulgated
thereunder.
(c) The
Option Shares will not be registered under the Securities Act, or the securities
laws of any state, and cannot be transferred, hypothecated, sold or otherwise
disposed of until: (i) a registration statement with respect to such securities
is declared effective under the Securities Act, or (ii) CSWT receives an opinion
of its counsel that an exemption from the registration requirements of the
Securities Act is available. The certificates representing the Option Shares
shall contain a legend substantially as follows:
“THE
SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH
RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR CHINA SOFTWARE
TECHNOLOGY GROUP CO., LTD. RECEIVES AN OPINION OF COUNSEL FOR CHINA SOFTWARE
TECHNOLOGY GROUP CO., LTD. THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT IS AVAILABLE.”
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLERS
The
Sellers hereby jointly and severally represent and warrant to the Purchaser,
as
of the date of this Agreement and as of the Option Closing Date, as follows:
SECTION
2.01
ORGANIZATION,
STANDING AND POWER.
CSWT
is a
corporation duly incorporated, validly existing and in good standing under
the
laws of the State of Delaware, and has corporate power and authority to conduct
its business as presently conducted by it and to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement.
SECTION
2.02 CAPITALIZATION.
(a) There
are
41,000,000 shares of capital stock of CSWT authorized, consisting of 40,000,000
shares of common stock, $0.001 par value per share (the “CSWT
Common Shares”)
and
1,000,000 shares of preferred stock, $0.001 per share (“CSWT
Preferred Shares”).
As of
the date of this Agreement there are 21,513,380 CSWT Common Shares issued and
outstanding.
(b) No
CSWT
Common Shares or CSWT Preferred Shares have been reserved for issuance to any
Person, and there are no other outstanding rights, warrants, options or
agreements for the purchase of CSWT Common or Preferred Shares except as
provided in the Merger Agreement or in the Operating Subsidiary Agreement.
(c) All
outstanding CSWT Common Shares are validly issued, fully paid, non-assessable,
not subject to pre-emptive rights and have been issued in compliance with all
state and federal securities laws or other Applicable Law.
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SECTION
2.03 FINANCIAL
CONDITION
The
financial statements of CSWT and the additional information regarding the
financial condition of CSWT contained in the Annual Report on Form 10-KSB filed
by CSWT with the Securities and Exchange Commission on April 6, 2007
(“10-KSB”)
are
true,
correct and complete in all material respects, are not misleading and do not
omit to state any material fact which is necessary to make the statements and
information contained in the Proxy Statement not misleading in any material
respect. The financial statements included in the Proxy Statement were prepared
in accordance with generally accepted accounting principles and fairly reflect
the financial condition of CSWT as of the dates stated and the results of its
operations for the periods presented.
SECTION
2.04 ABSENCE
OF CERTAIN CHANGES OR EVENTS.
Since
December 31, 2006, except as reported in the 10-KSB and except as contemplated
by this Agreement:
(a) there
has
not been any Material Adverse Change in the business, operations, properties,
assets, or condition of CSWT;
(b) CSWT
has
not (i) amended its Certificate of Incorporation; (ii) declared or made, or
agreed to declare or make, any payment of dividends or distributions of any
assets of any kind whatsoever to stockholders or purchased or redeemed, or
agreed to purchase or redeem, any outstanding capital stock; (iii) made any
material change in its method of management, operation, or accounting; (iv)
entered into any material transaction; or (v) made any accrual or arrangement
for payment of bonuses or special compensation of any kind or any severance
or
termination pay to any present or former officer or employee;
(c) CSWT
has
not (i) borrowed or agreed to borrow any funds or incurred, or become subject
to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (ii) paid any material
obligation or liability (absolute or contingent) other than current liabilities
reflected in or shown on the most recent CSWT balance sheet, and current
liabilities incurred since that date in the ordinary course of business; (iii)
sold or transferred, or agreed to sell or transfer, any material assets,
properties, or rights, or canceled, or agreed to cancel, any material debts
or
claims; or (iv) made or permitted any material amendment or termination of
any
contract, agreement, or license to which it is a party.
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SECTION
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2.05 |
LITIGATION
|
There
is
no action, suit, investigation, audit or proceeding pending against, or to
the
Knowledge of CSWT, threatened against or affecting, CSWT or any of its assets
or
properties before any court or arbitrator or any governmental body, agency
or
official.
SECTION
2.06 COMPLIANCE
WITH APPLICABLE LAWS.
To
the
Knowledge of the Sellers, the business of CSWT has not been, and is not being,
conducted in violation of any Applicable Law.
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SECTION
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2.07 |
TAX
RETURNS AND PAYMENT
|
CSWT
has
duly and timely filed all material Tax Returns required to be filed by it and
has duly and timely paid all Taxes shown thereon to be due. Except as disclosed
in financial statements filed with the 10-KSB, there is no material claim for
Taxes that is a Lien against the property of CSWT other than Liens for Taxes
not
yet due and payable, none of which is material. CSWT has not received written
notification of any audit of any Tax Return of CSWT being conducted or pending
by a Tax authority, no extension or waiver of the statute of limitations on
the
assessment of any Taxes has been granted by CSWT which is currently in effect,
and CSWT is not a party to any agreement, contract or arrangement with any
Tax
authority or otherwise, which may result in the payment of any material amount
in excess of the amount reflected on the above referenced CSWT financial
statements.
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SECTION
2.08 SECURITY
LISTING
CSWT
is a
fully compliant reporting company under the Securities Exchange Act of 1934,
as
amended (the “Exchange
Act”),
and
all CSWT public filings required under the Exchange Act have been made. The
common stock of CSWT is listed for quotation on the OTC Bulletin Board. To
the
Knowledge of CSWT, CSWT has not been threatened or is not subject to removal
of
its common stock from the OTC Bulletin Board.
SECTION
2.09 FINDERS’
FEES
The
Sellers have not incurred, nor will they incur, directly or indirectly, any
liability for brokers’ or finders’ fees or agents’ commissions or investment
bankers’ fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
ARTICLE
III
SPIN-OFF
OF SUBSIDIARY
Prior
to
the Closing Date of the Merger, CSWT is entering into an Assignment and
Assumption and Management Agreement which contemplates that it will assign
to a
wholly-owned subsidiary (the “Operating
Sub”)
all of
its assets, and that it will subsequently distribute the capital stock of the
Operating Sub to the holders of its Common Stock. The Purchaser hereby agrees,
for the benefit of the Seller, CSWT and the Operating Sub, that upon receipt
by
it of any shares of capital stock of the Operating Sub, it will surrender said
shares to the Operating Sub as a contribution to capital, without any additional
consideration therefore.
ARTICLE
IV
TERMINATION
SECTION
4.01 TERMINATION.
This
Agreement may be terminated and the Merger may be abandoned at any time prior
to
the Effective Time by:
(a) The
mutual written consent of the Parties.
(b) The
Purchaser, if any of the Sellers shall have breached in any material respect
any
of his representations, warranties, covenants or other agreements contained
in
this Agreement, and the breach cannot be or has not been cured within thirty
(30) calendar days after the giving of written notice by the Purchaser to the
Sellers;
(c) The
Sellers, if the Purchaser shall have breached in any material respect any of
his
representations, warranties, covenants or other agreements contained in this
Agreement, and the breach cannot be or has not been cured within thirty (30)
calendar days after the giving of written notice by AWSG to CSWT; or
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(d) Without
any action on the part of the Parties if required by Applicable Law or if the
Closing of the Merger shall not be consummated by July31, 2007, unless extended
by written agreement of the Parties.
ARTICLE
V
CONFIDENTIALITY
SECTION
5.01 CONFIDENTIALITY
Each
of
the Parties will keep confidential all information and documents obtained from
the other, (except for any information disclosed to the public pursuant to
a
press release authorized by the Parties); and in the event the Closing does
not
occur or this Agreement is terminated for any reason, will promptly return
such
documents and all copies of such documents and all notes and other evidence
thereof, including material stored on a computer, and will not use such
information for its own advantage, except to the extent that (i) the information
must be disclosed by law, (ii) the information becomes publicly available by
reason other than disclosure by the Party subject to the confidentiality
obligation, (iii) the information is independently developed without use of
or
reference to the other Party’s confidential information, (iv) the information is
obtained from another source not obligated to keep such information
confidential, or (v) the information is already publicly known or known to
the
receiving Party when disclosed as demonstrated by written documentation in
the
possession of such Party at such time.
ARTICLE
VI
MISCELLANEOUS
SECTION
6.01 EXPENSES
Except
as
contemplated by this Agreement, all costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated by
this Agreement shall be paid by the Party incurring such expenses.
SECTION
6.02 APPLICABLE
LAW
This
Agreement shall be governed by the laws of the State of Delaware, without giving
effect to the principles of conflicts of laws thereof, as applied to agreements
entered into and to be performed in such state.
SECTION
6.03 NOTICES.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given or made as follows:
(a) If
sent
by reputable overnight air courier (such as Federal Express), 2 business days
after being sent;
(b) If
sent
by facsimile transmission, with a copy mailed on the same day in the manner
provided in clause (a) above, when transmitted and receipt is confirmed by
the
fax machine; or
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(c)
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If
otherwise actually personally delivered, when delivered.
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All
notices and other communications under this Agreement shall be sent or delivered
as follows:
If
to
Purchaser, to:
Xxxxx
Xxxx
Xxxxxx
Technology & Investment Corp.
000
Xxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Telephone:
000-000-0000 X 000
Facsimile:
000-000-0000
with
a
copy (which shall not constitute notice) to:
Xxxxxx
Xxxxxx, Esq.
00
Xxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
If
to
Sellers, to:
Xx.
Xxxx
Xxxx Xx
China
Software Technology Group Co., Ltd.
Xxxxxxxx
Xxxxxxxx, Xx. 0, Xxxxx 0, Xxxxx A
Hi-Tech
Industrial Park, Xxxxxxx Xxxxxxxx
Xxxxxxxx,
X.X. Xxxxx 000000
Telephone:
000-000-0000
Facsimile:
000-0000-0000
with
a
copy (which shall not constitute notice) to:
Xxxxxx
Xxxxxx, Esq.
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
212-688-7273
Each
Party may change its address by written notice in accordance with this Section.
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SECTION
6.04
ENTIRE AGREEMENT.
This
Agreement (including the documents and instruments referred to in this
Agreement) contains the entire understanding of the Parties with respect to
the
subject matter contained in this Agreement, and supersedes and cancels all
prior
agreements, negotiations, correspondence, undertakings and communications of
the
Parties, oral or written, respecting such subject matter.
SECTION
6.05 COUNTERPARTS.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which shall be considered one and the same
agreement.
IN
WITNESS WHEREOF,
the
Parties have duly executed this Agreement as of the date first above written.
| SELLERS: | WARNER TECHNOLOGY & INVESTMENT CORP. | ||
| /s/ Yuan Xxxx Xx | /s/ Xxxxxxx Xxxx | ||
|
Yuan Xxxx Xx |
Xxxxxxx Xxxx, |
||
| Name Title More Title |
President |
| /s/ Xxxx Xxxx | |||
|
Xxxx
Xxxx
|
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