Exhibit 10.1
COMMON STOCK
PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the 1st day of October, 2009 (the "Effective Date"), by and between Diffon
Corporation, a South Korean corporation (the "Company") and Franklin Wireless
Corporation, a Nevada corporation (the "Purchaser").
RECITALS
A. The Company wishes to obtain, and the Purchaser is willing to sell and issue
shares of common stock of the Company, on the terms and subject to the
conditions set forth in this Agreement.
NOW THEREFORE, the parties hereby agree as follows:
1. Purchase and Sale of Securities.
1.1. Authorization and Sale of Common Stock.
(a) On the terms and subject to the conditions set
forth in this Agreement and the exhibits hereto; (i) Purchaser agrees to
purchase from the Company at the Closing (as defined below) and the Company
agrees to sell and issue to the Purchaser at the Closing, Six Hundred Sixty Six
Thousand, Six Hundred Sixty Seven (666,667) shares of the Company's Common Stock
(for the purchase price of KW 1,500 or US $1.25 per share for an aggregate
purchase price of KW 1,000,000,000 or US $833,333 (the "Purchase Price"). The
shares of Common Stock to be issued and sold pursuant to this Agreement are
referred to as the "Shares."
1.2. Closing. The closing of the purchase and sale of the
Shares shall take place at the offices of Solomon Ward Seidenwurm & Smith LLP,
401 B Street, Suite 1200 San Diego, CA, California 92101 at 10:00 a.m., P.D.T.,
on October 5, 2009 (the "Closing Date") or at such other time and place as the
Company and Purchaser mutually agree (the "Closing").
1.2.1 At the Closing, the Company shall deliver to
Purchaser (a) a counterpart of the Stockholders Agreement in the form attached
as Exhibit A (the "Stockholders Agreement"), duly executed by the Company, Ji Ho
Cho and Seok Kwon Hong (the "Major Shareholders"); (b) a counterpart of the
Share Exchange Agreement in the form attached as Exhibit B (the "Exchange
Agreement") duly executed by the Company, and the Major Shareholders; (c) a
share certificate for 666,667 Shares registered in Purchaser's name; and (d) a
counterpart of a Product Supply and Purchase Agreement ("Supply Agreement")
executed by the Company, a copy of which is attached hereto as Exhibit C. The
Stockholders Agreement, Exchange Agreement and Supply Agreement are referred to
as the "Ancillary Agreements"
1.2.2 At the Closing, Purchaser shall (a) pay the
Purchase Price by check or wire transfer to an account designated by the
Company, (b) deliver to the Company a counterpart of the Stockholders Agreement
duly executed by Purchaser; (c) a counterpart of the Exchange Agreement duly
executed by Purchaser; and a counterpart of the Supply Agreement duly executed
by Purchaser.
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2. Representations and Warranties of the Company.
The Company hereby makes the representations and warranties set forth
in this Article as of the Effective Date and as of the Closing, all of which
representations and warranties are being relied on by the Purchaser and will
survive the acquisition of the Shares by the Purchaser.
2.1. Power. Organization and Good Standing, The Company is a
corporation duly organized and existing under, and by virtue of, the laws of
South Korea and is and in good standing under such laws. The Company is
qualified to do business as a foreign corporation, and is in good standing in
the State of California and in each jurisdiction where the failure to be so
qualified would reasonably be expected to have a material adverse effect on the
Company's financial condition or business as presently conducted (a "Material
Adverse Effect"). The Company has the requisite corporate power to own and
operate its properties and assets and to carry on its business as presently
conducted. The Company has all requisite legal and corporate power to execute
and deliver this Agreement, to sell and issue the Shares hereunder and to carry
out and perform its obligations under the terms of this Agreement. True and
correct copies of the Company's Charter, governing instruments and minutes of
the Board of Directors and shareholders of the Company have been made available
to Purchaser.
2.2. Subsidiaries. The Company has no subsidiaries.
2.3. Capitalization. As of the Closing, the authorized capital
stock of the Company consists of 5,000,000 shares of Common Stock, of which
1,420,000 shares are issued and outstanding and of which 100,000 are reserved
for issuance of stock options. All such outstanding shares have been duly
authorized and validly issued, and will be fully paid and nonassessable. Upon
the Closing, and assuming the consummation of the transaction contemplated by
the Exchange Agreement, Purchaser will hold 51% of the outstanding capital stock
of the Company. There are no options, warrants, conversion privileges or other
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of capital stock or other securities of the Company. Upon
issuance at the Closing, the Shares shall have been issued in compliance with
all applicable laws.
2.4. Authorization. This Agreement when executed by the
Company, shall constitute valid and binding obligations of the Company,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies. The Ancillary Agreements when executed and
delivered by the Company and the Major Shareholders, as applicable, shall
constitute valid and binding obligations of the Company and the Major
Shareholders, as applicable, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Stockholders Agreement may be limited by applicable United States federal or
state securities laws. The Shares, when issued in compliance with the provisions
of this Agreement will be validly issued and will be fully paid and
nonassessable and free of any liens or encumbrances.
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2.5. Agreements; Action.
(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, Affiliates,
or any Affiliate thereof. "Affiliate" means as to any person or entity, a person
or entity controlling, controlled by or under common control with such person or
entity.
(b) Except for the Ancillary Agreements contemplated by the
Agreement, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company or any of its subsidiaries or
predecessors is a party or by which it is bound that involve (1) obligations
(contingent or otherwise) of, or payments to, the Company or any of its
subsidiaries in excess of, US $25,000, (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company or any
of its subsidiaries, or (iii) the grant of rights to manufacture, produce,
assemble, license, market, or sell its products to any other person or affect
the Company's exclusive right to develop, manufacture, assemble, distribute,
market or sell its products.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of US $25,000 or in excess
of US $100,000 in the aggregate, (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated with that person or
entity) shall be aggregated for the purposes of meeting the individual minimum
dollar amounts of each such subsection.
2.6. Financial Statements and Changes. The Company has
delivered to Purchaser its unaudited balance sheet and income statement as of
and for the fiscal years ended December 31, 2007 and December 31, 2008 and its
balance sheet and income statement as of and for the eight months ended August
31, 2009 (the "Financial Statements"). The Financial Statements are complete and
correct in all material respects, have been prepared in accordance with
generally accepted accounting principles, consistently applied, and fairly
present the financial condition and operating results of the Company as of the
dates, and during the periods, indicated therein. The Company has no liability
or obligation, absolute or contingent (individually or in the aggregate), except
obligations and liabilities incurred after the date of organization in the
ordinary course of business that are not material, individually or in the
aggregate. Since August 31, 2009, there has not been any material change in the
assets, liabilities, financial condition or operations of the Company from that
reflected in the Financial Statements, other than changes in the ordinary course
of business, none of which individually or in the aggregate has had or is
expected to have a Material Adverse Effect on such assets, liabilities,
financial condition or operation. Since August 31, 2009 there has not been:
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(a) any damage, destruction or loss of real or
personal property of the Company, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial condition,
operating results, prospects or business of the Company (as such business is
presently conducted);
(b) any waiver by the Company of a right or debt with
an amount or value in excess of US $10,000 owed to it;
(c) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company with an amount or
value in excess of LIS $10,000, except in the ordinary course of business and
that is not material to the assets, properties, financial condition, operating
results or business of the Company (as such business is presently conducted);
(d) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or properties
is hound or subject;
(e) any material change in any compensation
arrangement or agreement with any employee of the Company;
(f) any sale, assignment or transfer of the Company's
patents, trademarks, copyrights, trade secrets or other intangible intellectual
property assets;
(g) receipt of notice that there has been a loss of,
or material order cancellation by, any major customer of the Company;
(h) any mortgage, pledge, or creation of a security
interest in any of the Company's material properties or assets;
(i) any loans or guarantees made by the Company to or
for the benefit of its employees, officers or members, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(j) any agreement or commitment by the Company to do
any of the things described in this Section 2.6.
2.7. Patents, Trademarks, etc. The Company owns or has the
right to use, free and clear of all known liens, charges, claims and
restrictions, all patents, trademarks, service marks, trade names, copyrights,
licenses, processes and rights necessary to the business as now conducted, and
is not infringing upon or otherwise acting adversely to the right or claimed
right of, any person under or with respect to any of the foregoing. The Company
has not received any communications alleging that it has violated any patent,
trademark, service mark, trade name, copyright or trade secret or other
proprietary right of any other person or entity. Except for the Proprietary
Information and
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Invention Agreement (as defined below), or licenses or agreements arising from
the purchase by the Company of "off the shelf" or standard products with a
purchase price of less than US $10,000, there are no outstanding options,
licenses or agreements relating to intellectual property of the Company and the
Company is not bound by or a party to any options, licenses or agreements with
respect to the intellectual property of any other person or entity. No software
that contains, or is derived (in whole or in part) from any software that is
distributed as free software, open source software (e.g., Linux) or similar
licensing or distribution models (i) was or is used in connection with the
development of any of the Company's products or services or intellectual
property in any manner that would restrict the ability of the Company to protect
its proprietary interests in any such product or service or intellectual
property or (ii) was or is incorporated in whole or in part, or has been
distributed in whole or in part in conjunction with any product or service
provided by the Company in any manner that would restrict the ability of the
Company to protect its proprietary interests in any such product or service or
that could require, or could condition the use or distribution of any such
product on, the disclosure, licensing or distribution of any source code for any
portion of the Company's source code. The Company has not embedded any open
source, copyright or community source code in any of its products generally
available or in development, including but not limited to any libraries or code
licensed under any General Public License, Lesser General Public License or
similar license arrangement, in any manner that would restrict the ability of
the Company to protect its proprietary interests in any such product or that
could require, or could condition the use or distribution of any such product
on, the disclosure, licensing or distribution of any source code for any portion
of the Company's source code. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would materially interfere with the use
of his or her efforts to promote the interests of the Company or that would
conflict with the Company's business as it is presently contemplated to be
conducted.
2.8. Material Contracts and Commitments. The Company is not in
default under any mortgage, indenture, contract, agreement, instrument,
judgment, or decree to which it is a party or by which it or they are bound and
the transactions contemplated hereby will not result in such default.
2.9. Compliance with Other Instruments, None Burdensome. The
Company is not in violation of any term of its charter and governing
instruments. The Company is not in violation of any order, statute, rule, or
regulation which reasonably would be expected to have a material adverse effect
on the Company's business. The execution, delivery and performance of and
compliance with this Agreement and the issuance of the Shares by the Company
hereunder and to the Knowledge of the Company, the transfer of the shares of the
Company pursuant to the Exchange Agreement by the Major Shareholders, will not,
result in any violation of, or conflict with, or constitute a default under, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company or the Major Shareholders as
applicable. As used herein, "Knowledge" means the actual knowledge of the
Company's officers. directors and Major Shareholders after due and diligent
inquiry, including such knowledge as a person charged with the duties and
obligations to the Company would be reasonably deemed to have by virtue of his
position.
2.10. Litigation etc. There are no actions, suits, proceedings
or investigations pending or, to the Company's Knowledge, currently threatened
against it, the Major Shareholders or their respective properties, before any
court or governmental agency. The Company, and to its Knowledge, the Major
Shareholders, are not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court of government agency or
instrumentality. There is no action, suit, proceeding, or investigation by the
Company currently pending or that it intends to initiate.
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2.11. Employees. To the Knowledge of the Company, no employee
is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such employee with the Company or any other party because of the nature of its
business. The Company does not have any collective bargaining agreements
covering any of its employees, Each employee of the Company is now employed at
the Closing on an "at will" basis without rights to severance payments upon
termination. Each officer and employee of the Company has executed a
confidential information and invention assignment agreement, the form of which
has been approved by Purchaser (the "Proprietary Information and Inver ion
Agreement").
2.12. Registration Rights, The Company as of the Closing is
not under any obligation to register under the US Securities Act of 1933
("Securities Act") or any other security law of any jurisdiction, any of its
securities except as provided in the Stockholders Agreement.
2.13. Governmental Consent, etc. No consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority on the part of the Company, or to its Knowledge, the Major
Shareholders is required in connection with the valid execution and delivery of
this Agreement and the Ancillary Agreements, or the offer, sale or issuance of
the Shares, the exchange of Shares by the Major Shareholders pursuant to the
Exchange Agreement, or the consummation of any other transaction contemplated by
this Agreement or the Ancillary Agreements, except qualification (or taking such
action as may be necessary to secure an exemption from qualification, if
necessary) of the offer and sale of the Shares under the Securities Act, the
California Corporate Securities Law, other applicable US state Blue Sky laws,
and the securities or other laws of any other country or jurisdiction.
2.14. Permits. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which would have a Material Adverse
Effect, and the Company has a reasonable basis to believe that it can obtain,
without undue burden or expense, any similar authority for the conduct of the
Company's business as presently planned to be conducted, The Company is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.
2.15. Tax Returns, Payments and Elections. The Company has
filed all tax returns and reports (including information returns and reports) as
required by applicable law and such returns and reports are true and correct in
all material respects. The Company has never had any tax deficiency proposed or
assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
None of the Company's tax returns, including by way of example and not
limitation, all income, franchise, sales or use tax returns has ever been
audited by any governmental authority, The Company has withheld or collected
from each payment made to each of its employees, the amount of all taxes
(including but not limited to, US federal income taxes, US Federal Insurance
Contribution Act taxes and US Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid or will timely pay the same to the
proper tax receiving officers or authorized depositories.
2.16. Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans, and
encumbrances. With respect to the property and assets it leases, the Company is
in substantial compliance with such leases and holds a valid leasehold interest
free of any liens, claims or encumbrances,
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2.17. Obligations to Related Parties. No employee, officer, or
director of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company not in excess of US $10,000 and (iii) for other standard employee
benefits made generally available to all employees (including option agreements
outstanding under any option or other equity incentive plan approved the
Company's Board of Directors, and shareholders, as required). None of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a material
business relationship, or any firm or corporation that competes with the
Company, except in connection with the ownership of stock in publicly-traded
companies, which ownership does not exceed 1% of the outstanding capital stock
of such company. No employee, officer, or director of the Company, nor any
member of their immediate families, is, directly or indirectly, interested in
any material contract with the Company (other than such contracts as relate to
any such person's ownership of securities of the Company).
2.18. Insurance. The Company has in full force and effect fire
and casualty insurance, comprehensive general liability insurance in amounts
customary for companies in similar businesses similarly situated.
2.19. Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the US Employee Retirement Income Security
Act of 1974.
2.20. Finder's Fee. The Company is obligated to pay a 5%
finders fee for which it agrees to indemnify and hold harmless Purchaser
pursuant to the terms of Section 19. Other than as set forth above, the Company
will not be obligated for any finders' fee, investment banking fee, broker's
fee, or commission in connection with this transaction.
2.21. Compliance with Applicable Laws. The Company is in
compliance in all material respects with all laws in effect on or before the
Closing Date applicable to it and its business.
3. Representations and Warranties of Purchaser. Purchaser hereby makes
the representations and warranties set forth in this Article as of the Effective
Date and as of the Closing, all of which representations and warranties are
being relied on by the Company and will survive the acquisition of the Shares by
the Purchaser.
3.1. Acknowledgement. Purchaser acknowledges and understands
that the Shares have not been registered or qualified under the US Securities
Act, or qualified under the securities laws of any state in reliance on
exemptions from registration and qualification for nonpublic offerings,
Purchaser further understands that, except as set forth in the Stockholders
Agreement, the Company is under no obligation to register or qualify the Shares
on Purchaser's behalf. Purchaser's purchase of the Shares is for Purchaser's own
account and not with a view to or for sale in connection with any distribution
of the Shares.
3.2. Principal Place of Business. Purchaser has a principal
place of business in the state of California and has no present intention of
moving its principal place of business to any other jurisdiction.
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3.3. Compliance with Applicable Laws. Purchaser has complied
in all material respects with all applicable federal, state and local laws and
regulations that would adversely affect or prevent Purchaser's execution and
delivery of this Agreement, the Stockholders Agreement, or the consummation of
the transactions contemplated hereby or thereby.
3.4. Authorization. This Agreement and the Ancillary
Agreements, when executed and delivered by Purchaser shall constitute valid and
binding obligation of Purchaser enforceable in accordance with their terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Stockholders Agreement may be limited by applicable US federal or state
securities laws.
3.5. Compliance. Purchaser is not in violation of (a) any
terms of its organizational or other governing document, or (b) any order,
statute, rule, or regulation applicable to it, which violation reasonably would
be expected to have a Material Adverse Effect on its business.
4. Conditions to Closing.
4.1. Conditions to Purchaser' Obligations. The obligations of
the Purchaser under this Agreement are subject to the fulfillment at the time of
the Closing of each of the following conditions, any of which may be waived by
Purchaser:
(a) Representations and Warranties. The
representations and warranties of the Company contained in Section 2 shall be
true and complete in all material respects on and as of the date of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date thereof.
(b) Performance. The Company and the Major
Shareholders, as applicable, shall have performed and complied with their
respective all agreements, obligations and conditions contained in this
Agreement and the Ancillary Agreements that are required to be performed or
complied with by it or them on or before the Closing.
4.2. Conditions to Company's Obligations. The obligations of
the Company under this Agreement are subject to the fulfillment at the time of
the Closing of each of the following conditions, any of which may be waived by
the Company:
(a) Representations and Warranties. The
representations and warranties of the Purchaser contained in Section 3 shall be
true and complete on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date thereof.
(b) Performance. Purchaser shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement and the Ancillary Agreements that are required to be performed or
complied with by it on or before the Closing
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4.3. Additional Conditions to Closing. The obligations of the
Purchaser under this Agreement are subject to the fulfillment at the time of the
Closing of each of the following conditions, any of which may he waived by the
Purchaser:
(a) As contemplated by the Stockholders Agreement,
the Company shall fix its Board of Directors at five and Purchaser's two
designees shall be elected as directors of the Company effective upon the
Closing.
(b) The Company, the Major Shareholders and the
Purchaser, as applicable, shall have entered into the Ancillary Agreements, as
applicable, and the Ancillary Agreements shall be in full force and effect.
(c) No action, suit, or proceeding shall be pending
or threatened before (or that could come before) any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before (or that could come before) any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would prevent
consummation of any of the transactions contemplated by this Agreement.
(d) Closing Deliverables. At the Closing, the Company
shall have delivered to counsel to the Purchaser the following:
(i) a certificate executed by the Chief
Executive Officer of the Company on behalf of the Company, satisfactory to the
Purchaser's counsel, certifying the satisfaction of the conditions to closing
listed in Sections 4.1(a) and 4.1(b);
(ii) a certificate of the Secretary of State
of the State of California, dated as of a date within five days of the date of
the Closing, with respect to the good standing of the Company in the State of
California; and
(iii) a certificate certifying (A) the
Charter and other governing instruments of the Company, and (B) resolutions of
the Board of Directors (and shareholders if and as required) of the Company
approving the Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
5. Termination.
5.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) The Company and Purchaser may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) Purchaser may terminate this Agreement by giving
written notice to the Company at any time prior to the Closing (A) in the event
the Company has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, Purchaser has notified the
Company of the breach and the breach has continued without cure for a period of
fifteen (15) days after the notice of breach, (B) if the Closing shall not have
occurred on or before October30, 2009, by reason of the failure of any condition
precedent under Section 4 hereof (unless the failure results primarily from
Purchaser itself breaching any representation, warranty, or covenant contained
in this Agreement); (C) as due diligence is continuing the Purchaser is not
satisfied in its sole discretion with any aspect of the Company's condition and
its business and; and
(c) The Company may terminate this Agreement by
giving written notice to Purchaser at any time prior to the Closing (A) in the
event Purchaser has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Company has notified
Purchaser of the breach, and the breach has continued without cure for a period
of fifteen (15) days after the notice of breach, or (B) if the Closing shall not
have occurred on or before October 30, 2009, by reason of the failure of any
condition precedent under Section 4 hereof (unless the failure results primarily
from the Company itself breaching any representation, warranty, or covenant
contained in this Agreement).
5.2. Effect of Termination. If any party terminates this
Agreement pursuant to Section 5.1(a) above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party (except for any liability of any party then in breach).
6. Effectiveness. This Agreement will not be binding upon either party
unless and until a fully executed copy hereof is delivered by the other party.
7. Further Assurances, Each party to this Agreement will execute all
instruments and documents and take all actions as may be reasonably required to
effectuate this Agreement.
8. Venue and Jurisdiction. This Agreement will be governed by and
construed in accordance with the laws of the State of California. For purposes
of venue and jurisdiction, this Agreement will be deemed made and to be
performed in San Diego County, California. Venue for all purposes will lie
exclusively with the state and federal courts located in San Diego County,
California. Each party hereby submits to the jurisdiction of such courts.
9. Counterparts and Exhibits, This Agreement may be executed in
counterparts, each of which will be deemed an original and all of which together
will constitute one document, All exhibits referred to in this Agreement are
attached to this Agreement and incorporated by reference.
10. Time of Essence. Timely, strict and punctual performance are of the
essence with respect to each provision of this Agreement.
11. Headings and Interpretation. The headings of the Sections of this
Agreement have been included only for convenience, and may not be deemed in any
manner to modify or limit any of the provisions of this Agreement, or be used in
any manner in the interpretation of this Agreement. Whenever the context so
requires in this Agreement, all words used in the singular will be construed to
have been used in the plural (and vice versa), each gender will be construed to
include any other genders, and the word "person" will be construed to include a
natural person, corporation, firm, partnership, joint venture, trust, estate, or
any other entity. Each party to this Agreement has reviewed and revised this
Agreement. Each party to this Agreement has had the opportunity to have such
party's legal counsel review and revise this Agreement. The rule of construction
that any ambiguities are to be resolved against the drafting party will not be
employed in the interpretation of this Agreement or of any amendments or
exhibits to this Agreement
12. Successors-in-Interest and Assigns. This Agreement is binding on
and inures to the benefit of the successors-in-interest and assigns of each
party to this Agreement.
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13. Fees and Expenses. Each of the Company and the Purchaser agrees to
pay its own expenses incident to the performance of its obligations hereunder;
provided however that the Company shall bear up to $10,000 for any costs of any
due diligence or audit expenses as required by applicable law which are incurred
by Purchaser (including without limitation legal, accounting other audit
expense) in connection with the transactions contemplated by this Agreement and
the Ancillary Agreements.
14. Notices. All notices or other communications required or permitted
to be given to a party to this Agreement will be in writing and will be
personally delivered, sent by certified mail, postage prepaid, return receipt
requested, or sent by an overnight express courier service that provides written
confirmation of delivery, to the party at its address as set forth below each
party's signature. Each notice or other communication will be deemed given,
delivered and received upon its actual receipt, except that if it is sent by
mail in accordance with this Section, then it will be deemed given, delivered
and received three days after the date the notice or other communication is
deposited with the United States Postal Service in accordance with this Section.
Any party to this Agreement may give a notice of a change of its address to the
other party(ies) to this Agreement.
15. Waiver. Any waiver of a default under this Agreement must be in
writing and will not be a waiver of any other default concerning the same or any
other provision of this Agreement. No delay or omission in the exercise of any
right or remedy will impair such right or remedy or be construed as a waiver. A
consent to or approval of any act will not be deemed to waive or render
unnecessary consent to or approval of any other or subsequent act.
16. Prior Understandings. This Agreement and the Ancillary Agreements
contain the entire agreement between the parties to this Agreement with respect
to the subject matter of this Agreement, is intended as a final expression of
the parties' agreement with respect to the terms as are included in this
Agreement and the Ancillary Agreements, is intended as a complete and exclusive
statement of the terms of the parties' agreements and understandings, and
supersedes the Investment Memorandum dated September 8, 2009, and all
negotiations, stipulations, understandings, agreements, representations and
warranties, if any, with respect to the subject matter, which precede the
execution of this Agreement.
17. Modifications. This Agreement may be modified only by a writing
executed by the party(ies) to this Agreement against whom enforcement of such
modification is sought.
18. Partial Invalidity. Each provision of this Agreement will be valid
and enforceable to the fullest extent permitted by law. If any provision of this
Agreement or the application of the provision to any person or circumstance
will, to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of the provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, will not be affected
by such invalidity or unenforceability, unless the provision or its application
is essential to this Agreement.
19. Indemnification; Survival of Representations and Warranties.
Purchaser and its officers, directors, employees and shareholders shall be
indemnified and held harmless by the Company for and against any and all losses,
claims or liabilities arising out of or resulting from; (a) the breach of any
representation or warranty made by the Company contained in this Agreement; or
(b) the breach of any of the Company's covenants or agreements contained in this
Agreement; and (c) any and all reasonable costs and expenses, including
11
reasonable legal fees and expenses, in connection with enforcing the
indemnification rights of Purchaser under this Section 19. The representations
and warranties of the parties hereto contained in this Agreement shall survive
the Closing regardless of any investigation made by or on behalf of the Company
or Purchase; for a period of three (3) years after the Closing; provided,
however, that: (a) the representations, warranties and covenants contained in
Section 2.1, Section 2.3, Section 2.20, and Section 3.4 shall survive the
Closing indefinitely; (b) the representations, and warranties contained in
Section 2.15 shall survive until one (1) year after expiration of the applicable
statute of limitations.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
SIGNATURE PAGE FOLLOWS
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SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT
THE COMPANY:
Diffon Corporation
By: /s/ Cho, Ji Ho
------------------------------
Title: CEO
Digital Tower Aston 1505,
505-15 Gasan, Geumcheon
Seoul 153-803381
Telefax: 82.2.2082.8920
PURCHASER:
By: /s/ OC Kim
------------------------------
Title: President
5440 Morehouse Dr. Suite 1000
San Diego, CA 92121, USA
Telefax: 858-623-0050
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EXHIBIT A
Stockholders Agreement
EXHIBIT B
Exchange Agreement
EXHIBIT C
Supply Agreement