EXHIBIT 2.3
SHARE EXCHANGE AGREEMENT
BETWEEN
LOTUS PACIFIC, INC.
AND
SHAREHOLDERS OF TURBONET COMMUNICATIONS
March 15, 1999
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is entered into effective
as of March 15, 1999, by and between Lotus Pacific, Inc. (hereinafter "LPFC")
and existing shareholders (hereinafter "Shareholders") of TurboNet
Communications (hereinafter "TurboNet") represented by Hsing Chih Tuan (the
"Representative"). Each of LPFC and Shareholders is also referred to as a
"Party", collectively the "Parties".
RECITALS
WHEREAS, LPFC desires to acquire certain interest in TurboNet as defined
herein;
WHEREAS, LPFC agrees to issue to the Shareholders eighty million U.S.
dollars ($80,000,000) worth of common stock (hereinafter the "LPFC Shares")
and to provide TurboNet with an additional twenty-million U.S.dollars
($20,000,000) in cash as working capital;
WHEREAS, TurboNet desires to issue twenty million six hundred seventy-six
thousand three hundred fifteen (20,676,315) shares of its common stock
constituting eighty-one percent (81%) of TurboNet's equity interest at the
time of the closing (hereinafter the "TurboNet Shares") to Shareholders on a
pro rata basis.
WHEREAS, Shareholders desire immediately to transfer the TurboNet Shares
to LPFC in exchange for the LPFC Shares.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Interest Acquired
LPFC will acquire eighty-one percent (81%) of the equity interest in TurboNet
(hereinafter the "TurboNet Equity Interest").
2. Consideration
a. In consideration of Shareholders' agreement to transfer to LPFC the
TurboNet Shares, LPFC shall transfer to the Shareholders certain number
of shares of its common stock with a market value of eighty million U.S.
dollars ($80,000,000), which shall be determined based on the average
closing price of LPFC shares in the open market during the four (4) weeks
immediately after the execution of this Agreement.
b. As of the date hereof, TurboNet has four million eight hundred fifty
thousand (4,850,000) shares of stock issued and outstanding.
In consideration of LPFC's transfer of LPFC Shares, TurboNet shall issue,
on a pro rata basis, twenty million six hundred seventy-six thousand
three hundred fifteen (20,676,315) shares of its common stock
constituting eighty-one percent (81%) of TurboNet's equity interest at
the time of the closing to the Shareholders who shall, in turn,
immediately transfer the same to LPFC in exchange for the LPFC Shares.
3. Restriction on LPFC Shares
The Parties understand that the LPFC Shares to be transferred to the
Shareholders are restricted as defined under the Securities Act of 1933
(the "1933 Act") as amended, the Securities Exchange Act of 1934 (the
"1934 Act"), as amended, and other federal and state securities laws and
regulations. As such, the share certificate(s) shall bear certain legend
pursuant to the 1933 and 1934 Acts. The Parties agree that the LPFC
Shares so transferred shall be prohibited from being sold, in whole or
in part, and shall be held in trust by Mr. Hsing Chih Tuan, President of
TurboNet acting as Representative of the Shareholders, until TurboNet's
annual gross revenue shall have exceeded thirty million U.S. dollars
($30,000,000) with an annual (before-tax) net profit of not less than six
million U.S. dollars ($6,000,000).
4. The Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur upon execution and delivery of this Agreement by
the Parties together with all documents, instruments, and agreements
referred to herein by the respective parties referred to in such
documents, instruments, and agreements. The date on which the Closing
occurs shall be referred to as the "Closing Date". The Closing shall
occur at such location and at such time as the Parties shall mutually
agree.
5. Shareholders' Obligations
a. Currently, TurboNet is authorized to issue up to ten million (10,000,000)
shares of stock. Shareholders agree to authorize TurboNet to amend, or
cause to be amended, its certificate of incorporation to increase the
number of shares it is authorized to issue to thirty million (30,000,000)
shares so as to consummate the transaction contemplated hereby;
b. At the time of Closing, Representative shall, on behalf of Shareholders,
deliver to LPFC a stock certificate or stock certificates representing
and evidencing the TurboNet Shares, endorsed in blank or accompanied by
duly executed assignment documents or stock powers sufficient to transfer
good and marketable title to the TurboNet Shares to LPFC;
c. Execute and deliver this Agreement and all other documents, instruments,
and agreements referred to herein or contemplated hereby; and
d. Provide LPFC with a list of Shareholders specifying the respective
numbers of shares to be transferred to each individual shareholder.
6. LPFC's Obligations
a. At the time of Closing, LPFC shall deliver to the Representative a stock
certificate or stock certificates representing and evidencing the LPFC
Shares, endorsed in blank or accompanied by duly executed assignment
documents or stock powers sufficient to transfer good and marketable
title to the LPFC Shares to the individuals and entities set forth in the
list provided by TurboNet pursuant to Section 5.d hereof; and
b. Execute and deliver this Agreement and all other documents, instruments,
and agreements referred to herein or contemplated hereby.
7. Conditions Precedent
a. LPFC's completion of satisfactory due diligence (which shall mean that
LPFC has found nothing that varies substantially or materially with its
understanding currently of the operations of TurboNet), which shall
continue immediately and TurboNet agrees to cooperate with LPFC in all
reasonable respects.
b. Approval by the respective Parties' Boards of Directors and shareholders,
if necessary; and
c. The completion of any revisions and alterations which LPFC may deem
advisable to the documentation evidencing the operations of TurboNet.
8. Regulatory Approval
The parties recognize that, in securing required regulatory approvals, they
may be required to provide confirmation of the terms of this Agreement in
form and substance satisfactory to regulatory authorities. It is not
contemplated that copies of this Agreement will be provided to regulatory
authorities. Rather, the Parties agree to cooperate in the preparation and
execution of any agreements or confirmations necessary to secure regulatory
approvals.
9. Representations and Warranties of Shareholders
a. Validity of Shares. Shareholders hereby represent and warrant to LPFC
that they hold good and marketable title to the TurboNet Shares to be
transferred, which are duly and validly issued, fully paid and non-
assessable, free and clear of any and all liens, security interests and
other encumbrances.
b. Authorization of Transaction. Shareholders have authorized TurboNet's
directors and officers to execute and deliver this Agreement and to
perform its obligations hereunder.
c. Authority to Issue Additional TurboNet Shares. Currently, TurboNet is
authorized to issue up to ten million (10,000,000) shares of stock.
Shareholders have authorized TurboNet to amend, or cause to be amended,
its certificate of incorporation to increase the number of shares it is
authorized to issue to thirty million (30,000,000) shares so as to
consummate the transaction contemplated hereby.
d. Disclosure. The representations and warranties contained in this Section
9 do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements and
information contained in this Section 9 not misleading.
10. Representations and Warranties of LPFC
LPFC hereby represents and warrants to Shareholders that the statements
contained in this Section 10 are correct and complete as of the Closing
Date. Moreover, notwithstanding TurboNet's due diligence investigation of
LPFC, Shareholders may rely on the representations and warranties contained
in this Section 10.
a. Organization of LPFC. LPFC is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation.
b. Authorization of Transaction. LPFC has full power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder.
c. Authorization to Issue Shares of Common Stock. LPFC is duly authorized
to issue eighty million U.S. dollars ($80,000,000) worth of shares of
common stock to consummate the transaction contemplated hereby.
e. Validity of Shares. LPFC hereby represents and warrants to Shareholders
that the LPFC Shares to be transferred to Shareholders are duly and
validly issued, fully paid and non-assessable, free and clear of any and
all liens, security interests and other encumbrances.
f. Noncontravention. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (a)
violate any governing law or other restrictions of any governmental
authority to which LPFC is subject, or any provision of its charter or
bylaws, or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any person the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, permit, governmental approval,
certificate, instrument, or other arrangement to which it is a party or
by which it is bound or to which any of its assets or properties is
subject.
g. Disclosure. The representations and warranties contained in this Section
10 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 10 not misleading.
11. Miscellaneous
a. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any
way to the subject matter hereof.
b. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and assigns. No Party may assign this Agreement or any of its
rights, interests, or obligations hereunder without the prior written
consent of the other; provided, however, that such consent shall not be
unreasonably withheld.
c. Counterparts. This Agreement may be executed by facsimile signature and
in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
d. Headings. The section headings contained herein are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
e. Notices. All Notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or
other communication hereunder shall be deemed duly given if (and then
five (5) business days after) it is sent by air mail, postage prepaid,
and address to the intended recipient as set forth below:
Lotus Pacific, Inc.
200 Centennial Avenue
Suite 201
Piscataway, NJ 08854
Shareholders
5932 Bernardo Center Drive
San Diego, CA 92127
Attention: Hsing Chih Tuan
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the addresses set
forth above using any other means (including personal delivery,
recognized overnight or international courier, messenger service,
confirmed telecopy, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient
or receipt is confirmed by a third party or by electronic means. Any
Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
f. Applicable Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware, U.S.A.,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other state or jurisdiction)
that would cause the application of the laws of any state or jurisdiction
other than the State of Delaware.
g. Amendments and Waivers. No amendments of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenants hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder to affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
h. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any state or jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provision hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other state or jurisdiction.
i. Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
j. Construction: Official Version. The Parties have participated jointly
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 drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this
Agreement.
k. Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Party shall be entitled to an injunction
or injunctions to prevent breach of the provisions of this Agreement and
to enforce specifically this Agreement and the terms and provisions
hereof in any action instituted in any court of the U.S.A. or any state
thereof having jurisdiction over the Parties and the matter, in addition
to any other remedy to which they may be entitled, at law or equity.
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement on the date first above written.
LOTUS PACIFIC, INC.
By: /s/ James Yao
- ----------------------
Name: James Yao
Title: Chairman
SHAREHOLDERS OF
TURBONET COMMUNICATIONS
By: /s/Hsing Chin Tuan
- -------------------------
Name: Hsing Chih Tuan
Title: Representative of Shareholders