-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qs6w84swJfDOsf5ip1sRfyOj080nnY27ywwosQ475HKOfJFyQuNFYm+GcOcGNklN bFNN1MSRcq6mD9/BEIcgIA== 0001144204-08-012276.txt : 20080228 0001144204-08-012276.hdr.sgml : 20080228 20080228151710 ACCESSION NUMBER: 0001144204-08-012276 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080222 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080228 DATE AS OF CHANGE: 20080228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTECH ENVIRONMENTAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0001066923 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 980222013 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-32249 FILM NUMBER: 08650205 BUSINESS ADDRESS: STREET 1: 3233 GRAND AVENUE STREET 2: .SUITE N-353 CITY: CHINO HILLS STATE: CA ZIP: 91709-1489 BUSINESS PHONE: 8668153951 MAIL ADDRESS: STREET 1: 3233 GRAND AVENUE STREET 2: .SUITE N-353 CITY: CHINO HILLS STATE: CA ZIP: 91709-1489 FORMER COMPANY: FORMER CONFORMED NAME: CYBER PUBLIC RELATIONS INC DATE OF NAME CHANGE: 20010111 8-K 1 v105255_8k.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 22, 2008


ENTECH ENVIRONMENTAL TECHNOLOGIES, INC.
 

(Exact name of Registrant as specified in charter)

Florida
000-32249
98-0222013
 
 
 
(State of Incorporation)
(Commission File No.)
(IRS Employer
 
 
Identification Number)
 
 A-4F Tongxinge, Xietong Building, Gaoxin 2nd Road,
Hi-Tech Industrial Zone, Xi’an, Shaanxi province, PRC 710065
(Address of principal executive offices)
(Zip Code)

Registrant's telephone number, including area code: (011)-86-29-88386415  

 
3233 Grand Avenue, Suite N-353
 
 
Chino Hills, California 91709-1489
 
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17CFR230.425)
o
Soliciting material pursuant to Rule14a-12 under the Exchange Act (17CFR240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR240.13e-4(c))



TABLE OF CONTENTS

Item No.
Description of Item
Page No.
     
Item 1.01
Entry Into a Material Definitive Agreement
3
Item 5.02
Departure of Directors or Principal Officers;
 
 
Election of Directors; Appointment of Principal
 
 
Officers
15
Item 5.03
Amendments to Articles of Incorporation or Bylaws;
15
 
Change in Fiscal Year;
 
Item 9.01
Financial Statements and Exhibits
15
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this Current Report on Form 8-K contains some forward-looking statements. Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance and financial condition, including, in particular, future sales, product demand, the market for our products in the People’s Republic of China and elsewhere, competition, exchange rate fluctuations and the effect of economic conditions include forward-looking statements.

Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital, capital expenditures and other projections, they are subject to several risks and uncertainties.

Investors are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements.

As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections may be better or worse than projected. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events. You are advised, however, to consult any additional disclosures we make in our reports on Form 10-KSB, Form 10-QSB, Form 8-K, or their successors.
 
2


Item 1.01.
Entry into a Material Definitive Agreement. 
 
Overview

Between February 22, 2008 and February 25, 2008, Entech Environmental Technologies, Inc., a Florida corporation (hereafter referred to as theCompany”, “we” or “us”, as applicable), entered into a series of transactions whereby the Company acquired 100% of the ownership interest in Pacific Industry Holding Group Co. Ltd., a Vanuatu corporation (“PACIFIC”), from the shareholders of PACIFIC in a share exchange transaction and raised $3,400,000 gross proceeds from certain accredited investors in a private placement transaction. These transactions, collectively hereinafter referred to as “Reverse Merger Transactions,” were consummated simultaneously on February 26, 2008 and as a result of the consummation of these transactions, PACIFIC is now a wholly-owned subsidiary of the Company.

PACIFIC’s only business is acting as a holding company for Shaanxi Tianren Organic Food Co. Ltd., a company organized under the laws of the People’s Republic of China (“Tianren”), in which PACIFIC hold a 99% ownership interest. Currently, Tianren is engaged in the business of research and development, production and sales of organic foods, special concentrated fruit juice, fast-frozen and freeze-dried fruits and vegetables and fruit juice drinks.

The following sets forth the material agreements that the Company entered into in connection with the Reverse Merger Transactions and the material terms of these agreements:

1. Share Exchange Agreement

On February 22, 2008, the Company and Terrence Leong, the Company’s then Chief Executive Officer, entered into a Share Exchange Agreement with PACIFIC and all of the shareholders of PACIFIC (the “Agreement”). Pursuant to the Agreement, the shareholders of PACIFIC agreed to exchange 100 ordinary shares of PACIFIC, representing a 100% ownership interest in PACIFIC, for 1,000,000 shares of a newly designated Series A Convertible Preferred Stock of the Company, par value $0.001 per share (the “Share Exchange Transaction”).

2. Stock Purchase Agreement

In connection with the Share Exchange Transaction, on February 25, 2008, the Company entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Stock Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue 2,833,333 shares of a newly designated Series B Convertible Preferred Stock of the Company, par value $0.001 per share (“Series B Stock”) and warrants to purchase 7,000,000 shares of the Company’s common stock (the “Warrants”) to the investors, in exchange for a cash payment in the amount of $3,400,000. Under the Stock Purchase Agreement, the Company also agreed to deposit 2,000,000 shares of the Series B Stock into an escrow account to be held by an escrow agent as make good shares in the event the Company’s consolidated pre-tax income and pre-tax income per share, on a fully-diluted basis, for the years ended December 31, 2007, 2008 or 2009 are less than certain pre-determined target numbers.
 
3

 
The Stock Purchase Agreement provides for the purchase by the investors referred to below (the “Investors”) of the securities described below.

Name and Address
   
Amount of Investment
 
 
Number of Shares of Series B Preferred Stock
 
 
Number of Shares of Common Underlying Series B Preferred Stock
 
 
Number of Shares of Common Underlying Warrants
 
Barron Partners LP
 
$
3,300,000
   
2,750,000
   
2,750,000
   
6,794,118
 
Eos Holdings, LLC
 
$
100,000
   
83,333
   
83,333
   
205,882
 
Total
 
$
3,400,000
   
2,833,333
   
2,833,333
   
7,000,000
 
 
Representations; Warranties; Indemnification: The Stock Purchase Agreement contains representations and warranties by us and the investors which are customary for transactions of this type. The Stock Purchase Agreement also obligates us to indemnify the investors for any losses arising out of any breach of the agreement or failure by us to perform with respect to the representations, warranties or covenants in the agreement.
 
Covenants: The Stock Purchase Agreement contains certain covenants on our part, including the following:
 
 
o
Preferred Stock: we may not issue any preferred stock or convertible debt for three years following the Closing Date for so long as the investors shall continue to beneficially own 20% of the Series B Preferred Stock issued under the Stock Purchase Agreement;
 
 
o
Insider Selling: No person who is an officer, director or affiliate of the Company on February 25, 2008 or who becomes our officer or director subsequent to February 26, 2008 may sell any shares of our Common Stock in the public market prior to the earlier of thirty six (36) months from date the registration statement is filed pursuant to the Registration Rights Agreement (as defined below) is deemed effective. Andrew Barron Worden, Managing Partner of Barron Partners LP, and the Investors are not subject to this covenant;
 
 
o
Use of Proceeds: we must use the proceeds of the financing for acquisitions, working capital and other general corporate purposes;
 
4

 
 
o
Debt: Our debt-to- EBITDA ratio, at any given date, cannot exceed 3.5:1 for the most recent 12-month period until the expiration of two (2) years from the Closing Date;
 
 
o
Independent Directors: prior to April 26, 2008, we are required to increase the size of our Board of Directors to five or seven and cause the appointment of a majority of the board to be “independent directors,” as defined by the rules of the Nasdaq Stock Market. Our Board of Directors currently consists of two directors, one of whom is independent. We are required to pay the investors liquidated damages equal to amount equal to fourteen percent (14%) of the Purchase Price (as defined in the Stock Purchase Agreement) per annum, payable monthly in cash as calculated based on the number of days that we are not in compliance with this covenant;
 
 
o
Independent Directors on Audit and Compensation Committees: we are required, prior to April 26, 2008, to appoint (i) an audit committee comprised solely of not less than three independent directors and a (ii) compensation committee comprised of not less than three directors, a majority of whom are independent directors. We are required to pay the investors liquidated damages in an amount equal to fourteen percent (14%) of the Purchase Price per annum, payable monthly in cash as calculated based on the number of days that we are not in compliance with this covenant;
     
 
o
Chief Financial Officer: we are required, prior to March 28, 2008, to hire a chief financial officer who speaks and understands both English and Chinese and is familiar with GAAP. We are required to pay the investors liquidated damages equal to amount equal to fourteen percent (14%) of the Purchase Price per annum, payable monthly in cash as calculated based on the number of days that we are not in compliance with this covenant;
     
 
o
Listing, Securities Exchange Act of 1934 and Rule 144: we are prohibited from taking any action to terminate or suspend our reporting and filing obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Securities Act of 1933, as amended (the “Securities Act”), except as permitted under the transaction documents for the Reverse Merger Transaction. We are required to take all action necessary to continue the quotation or listing of our Common Stock on the OTC Bulletin Board or other exchange or market on which the Common Stock is trading or may be traded in the future. We are required to pay the investors liquidated damages in an amount equal to fourteen percent (14%) of the Purchase Price per annum, payable monthly in cash as calculated based on the number of days that we are not in compliance with this covenant;
 
5

 
 
o
Liquidated Damages and Limitations: our aggregated obligations to pay liquidated damages under the Stock Purchase Agreement, the Warrants and the Registration Rights Agreement which we entered into in connection with the Stock Purchase Agreement and which is summarized below shall not exceed eighteen (18%) of the total Purchase Price. If, pursuant to the Stock Purchase Agreement and the Registration Rights Agreement, we incur liquidated damages and are required to pay the Investors in cash and we fail to pay the Investors within 15 days following the end of the month when such cash liquidated damages become due, then, at the election of the Investors, we are required to deliver to each Investor shares of Series B Preferred Stock as liquidated damages pro rata based on the percentage that the number of Series B Preferred Stock beneficially owned by such Investor bears to the total number of Series B Preferred Stock outstanding at the time when the cash liquidated damages are due;
  
 
o
Employment and Consulting Contracts: until February 26, 2011 and for so long as the Investors continue to beneficially own in the aggregate at least 20% of Series B Preferred Sock issued under the Stock Purchase Agreement, we must obtain approval from the majority of the independent directors of the Board of Directors that any awards other than salary are customary, appropriate and reasonable for any officer, director or consultants whose compensation is more than $100,000 per annum;
     
 
o
Price Adjustments: for so long as the Investors shall hold at least 20% of the Series B Preferred Stock issued (except for certain exempt issuances not to exceed 5% of the outstanding shares of our Common Stock for every two year period and certain other issuances which do not apply pursuant to the Certificate of Designations), if the Company closes on the sale or issuance of Common Stock at a sale price, or warrants, options, convertible debt or equity securities with a exercise or conversion price per share which is less than the Conversion Price (as defined in the Certificate of Designation) then in effect, the Conversion Price in effect from and after the date of such transaction shall be adjusted in accordance with the terms of the Certificate of Designations;
 
 
o
Retention of Investor Relations Firm: we are required to retain an investor relations firm prior to April 26, 2008; and
     
 
o
Agreements Regarding HuLuDao Wanjia and YinKou Trusty Factory: Prior to March 28, 2008, we are required to cause Tianren, our indirect subsidiary in the People’s Republic of China, to (i) extend the term of its current management and lease agreement with HuLuDao WanJia Factory (the “HuLuDao WanJia Agreement”) to 20 years under the terms and conditions similar to those in the current management agreement, and (ii) enter into an agreement with YinKou Trusty Factory under the terms and conditions similar to those in the HuLuDao WanJia Agreement. In addition, we are required to cause Tianren to make arrangements, including without limitation, acquisition arrangements, with HuLuDao WanJia Factory and YinKou Trusty Factory so that after giving effect to such arrangements, the financials of HuLuDao WanJia Factory and YinKou Trusty Factory can be consolidated into the Company’s financials in accordance with the principles of the US GAAP.
 
6

 
 
o
Amendment of Articles of Incorporation: we are required to effect a 328.72898-for-1 reverse split of our outstanding common stock. In the event the reverse split is not effected prior to June 2, 2008, we are required to pay to the Investors, pro rata, as liquidated damages, an amount equal to one (1%) of the Purchase Price per month, payable monthly in cash as calculated based on the number of days that we are not in compliance with this covenant.
 
Right of First Refusal. prior to February 26, 2011 and for so long that the Investors shall continue to beneficially own in the aggregate at least 20% of Series B Preferred Sock or the Common Stock issued thereunder, the Investors have the right to participate pro rata in any financing (other than certain exempt issuances and issuances of the Company’s securities in a firm underwritten IPO).
 
Delivery of up to 2,000,000 additional shares of Series B Preferred Stock from Escrow Based on Pre-Tax Income and Pre-Tax Income Per Share: We delivered to an escrow agent at the closing 2,000,000 shares of Series B Preferred Stock (the “Make Good Escrow Stock”). If our consolidated “pre-tax income” for the year ended December 31, 2007 is less than RMB 67,400,000 (or the required pretax income per share), or our consolidated Pre-Tax Income for the fiscal year ending December 31, 2008 is less than RMB 84,924,000 (or the corresponding required pre-tax income per share), or our consolidated pre-tax Income for the fiscal year ending December 31, 2009 is less than RMB 107,004,240 (or the corresponding required pre-tax income per share), then the percentage shortfall shall be determined by dividing the amount of the shortfall by the applicable target number. If the percentage shortfall for the fiscal year 2007 is greater than 50%, then the escrow agent will deliver to the Investors all of the Make Good Escrow Stock pro rata according to the Investors’ ownership percentages which shall be the ratio of such Investor’s initial purchase price to the total purchase paid under the Stock Purchase Agreement. If the percentage shortfall for 2007 is less than fifty percent (50%), then the adjustment percentage shall be determined. The adjustment percentage shall mean the percentage that the percentage shortfall bears to fifty percent (50%). The escrow agent shall deliver to an Investor according to such Investor’s ownership percentage of such number of shares of Series B Preferred Stock as is determined by multiplying the adjustment percentage by Make Good Escrow Stock and retain the balance. If, after giving effect to the adjustment and delivery to the Investors as described in the foregoing, there are shares of Make Good Escrow Stock remaining, the same procedures shall apply based on our pre-tax income for our fiscal years 2008 and 2009.
 
7

 
Subsequent Transactions. As long as any Investor holds any of the Series B Preferred Stock or common stock issuable upon conversion of the Series B Preferred Stock or exercise of warrants issued under the Stock Purchase Agreement, we are prohibited from effecting or entering into an agreement to effect any transaction involving a variable rate transaction or a MFN transaction. A “variable rate transaction” means a transaction in which we issue or sell any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to our business or the market for our common stock. An “MFN transaction” means a transaction in which we issue or sell any securities in a capital raising transaction (or series of related transactions) which grants an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering. Investors are entitled to obtain injunctive relief against us to preclude any such issuance.
 
3. Registration Rights Agreement
In connection with the Stock Purchase Agreement, on February 25, 2008, the Company entered into a Registration Rights Agreement with the investors party to the Stock Purchase Agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to prepare and file one or more registration statements to register for resale the shares of the common stock of the Company issuable upon conversion of the Series B Stock and upon exercise of the warrants issued to the investors under the Stock Purchase Agreement except for shares issued or issuable as liquidated damages. Under the terms of the Registration Rights Agreement we are required to
 
 
o
with respect to the initial registration statement, prepare and file the initial registration statement prior to March 26, 2008; provided, however, that, if in the opinion of the counsel to the Company that the Company’s audited financials for the fiscal year 2007 are required to be included in the initial registration statement based on the applicable SEC rules, then such filing date shall be delayed to the earliest date when the Company’s audited financials for the fiscal year 2007 becomes available, but no later than March 30, 2008, and with respect to any subsequent registration statements, the later of (a) ninety (90) days after the Company receives a demand for registration of additional registrable securities or (b) thirty days following the earliest practical date on which the Company is permitted by the SEC to file such additional registration statement related to the registrable securities (which is at least 180 days from the effective date of the initial registration statement.)

 
o
to use our commercially reasonable best efforts to have that registration declared effective on the earlier to occur of
 
8


 
o
150 days after the closing date (February 26, 2008), however, if the filing date is delayed because the Company’s audited financials for the fiscal year 2007 are required to be included in the initial registration statement based on the applicable SEC rules, then 120 days following the filing date;
 
 
 
 
o
10 days following receipt of a no review or similar letter from the SEC or
 
 
o
the third business day following the day we receive notice from the SEC that the SEC has determined that the registration statement is eligible to be declared effective without further comments by the SEC.
 
The investors are also granted demand registration rights which require us, for so long as no more than eighty percent (80%) of the Series B Preferred Stock and common stock issuable upon conversion of such Series B Preferred Stock and issuable upon exercise of the warrants issued under the Stock Purchase Agreement have been registered or sold, to use our commercially reasonable best efforts to file such registration statement under the Securities Act as promptly as practicable upon our receipt of the Investors’ demand to register their registrable securities and cause such registration statement to be declared effective. The Company shall notify each Investor promptly when any such registration statement has been declared effective.

Our failure to meet this schedule and other timetables provided in the Registration Rights Agreement could result in the imposition of liquidated damages, which are payable in cash to the Investors (pro rata based on the percentage of Series B Preferred Stock owned by the Investors at the time such liquidated damages shall have incurred) equal to fourteen percent (14%) of the Purchase Price payable monthly based on the number of days such failure exists, which amount of liquidated damages, together with all liquidated damages that the Company may incur pursuant to the Registration Rights Agreement, the Warrant and the Stock Purchase Agreement, shall not exceed an aggregate of eighteen percent (18%) of the amount of the Purchase Price. In the event the SEC does not permit all of the registrable securities to be included in a Registration Statement because of its application of Rule 415, we will not incur any liquidated damages with respect to any registrable securities that we were not permitted to include on such registration statement and no liquidated damages will be payable for such failure with respect to any warrant shares.

4. Make Good Escrow Agreement

In connection with the Stock Purchase Agreement, on February 25, 2008, we entered into a Make Good Escrow Agreement with Tri-State Title & Escrow, LLC, as the escrow agent and the Investors (the “Make Good Escrow Agreement”), pursuant to which 2,000,000 shares of our Series B Preferred Stock are issued in the name of the escrow agent to be held by the escrow agent. These make good escrow shares do not have any voting rights. The delivery and release of these make good shares are subject to the terms of the Stock Purchase Agreement as described above and the Make Good Escrow Agreement.
 
9

 
5. The Series A Convertible Preferred Stock

In connection with the Share Exchange Transaction, we designated 1,000,000 shares of Series A Convertible Preferred Stock out of our total authorized number of 10,000, 000 shares of Preferred Stock, par value $0.001 per share. The rights and preferences of the Series A Preferred Stock are set forth in the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock which we filed with the Secretary of State of Florida on February 22, 2008. The following is a summary of the rights and preferences:

No Dividends. No dividends are payable with respect to the Series A Preferred Stock unless we pay dividends to holders of outstanding shares of Common Stock, in which event, each outstanding share of the Series A Preferred Stock will be entitled to receive dividends in an amount or value as would have been payable on the number of shares of Common Stock into which each share of Series A Preferred Stock would be convertible. The rights of holders of Series A Preferred Stock to receive dividends are subject to the rights of any holder of our Series B Preferred Stock or other senior stock.

Mandatory Conversion. We are required to file an amendment to our Articles of Incorporation (“Amendment”) with the Secretary of State of the State of Florida effecting a 328.72898-for-1 reverse stock split of our Common Stock (or a split using such other ratio that may be required) (the “Reverse Split”). Upon effectiveness of such reverse stock split, all the outstanding shares of Series A Preferred Stock will immediately and automatically convert into shares of Common Stock without any notice or action required on us or on the holders of Series A Preferred Stock or Common Stock (the “Mandatory Conversion”). In the Mandatory Conversion, each holder of Series A Preferred will be entitled to receive twenty two and 62/10,000 (22.0062) shares of fully paid and non-assessable Common Stock for every one (1) share of Series A held (the “Conversion Rate”).

Voting Rights. The holders of shares of Series A Preferred shall be entitled to the following voting rights:
 
(a)
Those voting rights required by applicable law; and
(b)           The right to vote together with the holders of the Common Stock and Series B Preferred Stock, as a single class, upon all matters submitted to holders of Common Stock for a vote, with each share of Series A Preferred Stock carrying a number of votes equal to the number of shares of Common Stock issuable in a Mandatory Conversion (as described below).

Redemption; Liquidation Preference. The Series A Preferred shall not be redeemable and shall have no liquidation preference.
 
10

 
6. Series B Convertible Preferred Stock

In connection with the Share Exchange Transaction, we designated 7,000,000 shares of Series B Convertible Preferred Stock out of our total authorized number of 10,000, 000 shares of Preferred Stock, par value $0.001 per share. The rights and preferences of the Series B Preferred Stock are set forth in the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock which we filed with the Secretary of State of Florida on February 22, 2008. The following is a summary of the rights and preferences:

No Dividends. No dividends are payable with respect to the Series A Preferred Stock and no dividends can be paid on our Common Stock while the Series B Preferred Stock is outstanding.

Voting Rights. The Series B Preferred Stock shall have no voting rights, except as required by Florida law. However, so long as any shares of Series B Preferred Stock are outstanding, we cannot, without the affirmative approval of the holders of 75% of the shares of the Series B Preferred Stock then outstanding,

(a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock or alter or amend the Certificate of Designations of the Series B Preferred Stock,

(b) authorize or create any class of stock (other than Series A Preferred Stock) ranking as to dividends or distribution of assets upon a liquidation senior to or otherwise pari passu with the Series B Preferred Stock, or any series of preferred stock possessing greater voting rights or the right to convert at a more favorable price than the Series B Preferred Stock,

(c) amend our certificate of incorporation or other charter documents in breach of any of the provisions hereof,

(d) increase the authorized number of shares of Series B Preferred Stock or the number of authorized shares of Preferred Stock.

Liquidation Preference. On liquidation the holders are entitled to receive $1.20 per share (out of available assets) before any distribution or payment can be made to the holders of any junior securities.

Conversion at Option of Holder. Upon effectiveness of the Reverse Split, each share of Series B Preferred Stock is convertible at any time into one share of common stock at the option of the holder. If the conversion price (initially $1.20) is adjusted, the conversion ratio will likewise be adjusted and the new conversion ratio will be determined by multiplying the conversion ratio in effect by a fraction, the numerator of which is the conversion price in effect before the adjustment and the denominator of which is the new conversion price.
 
11

 
Automatic Conversion on Change of Control. In the event of a “change of control” the shares of Series B Preferred Stock will be automatically converted into common stock. A “change in control” means a consolidation or merger of us with or into another company or entity in which we are not the surviving entity or the sale of all or substantially all of our assets to another company or entity not controlled by our then existing stockholders in a transaction or series of transactions.
 
4.9% Beneficial Ownership Limitation. Except in certain circumstances, the right of the holder to convert the Series B Preferred Stock is subject to the 4.9% limitation, with the result we shall not effect any conversion of the Series B Preferred Stock, and the holder has no right to convert any portion of the Series B Preferred Stock, to the extent that after giving effect to such conversion, the holder (together with the holder’s affiliates) would beneficially own in excess of 4.9% of the number of shares of common stock outstanding immediately after giving effect to such conversion.  Beneficial ownership is determined in accordance with Section 13(d) of the Exchange Act, and Regulation 13d-3 thereunder. The 4.9% limitation may not be waived or amended.
  
Liquidated Damages for Failing to Timely Deliver Certificates: If we fail to deliver the appropriate stock certificates within three trading days of the conversion date, we are required to pay the holder, in cash, liquidated damages the amount by which (x) the holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such holder was entitled to receive from the conversion at issue multiplied by (2) the price at which the sell order giving rise to such purchase obligation was executed.
 
Certain Adjustments.
 
Stock Dividends and Stock Splits. Appropriate adjustments will be made to the conversion ratio in the event of a stock dividend, stock distribution, stock split or reverse stock split or reclassification with respect to the outstanding shares of common stock.
 
Price Adjustment; Full Ratchet. From and after February 26, 2008 and until such time as the investors hold less than 20% of the Series B Preferred Stock, except for certain exempt issuances not to exceed 5% of the outstanding shares of Common Stock for every two year period, certain issuances as to which price adjustment has already been made, in the event we issue Common Stock at a price, or issue warrants, options, convertible debt or equity securities with a exercise price per share or conversion price which is less than the conversion price then in effect, then the conversion price will be reduced, concurrently with such issue or sale, to such lower price.

Subsequent Transactions. For so long as any investor holds any of the Series B Preferred Stock, we are prohibited from effecting or entering into an agreement to effect any transactions involving a “Variable Rate Transaction” or an “MFN Transaction”.
 
12

 
Subsequent Rights Offerings. We are prohibited from, at any time while the Series B Preferred Stock is outstanding, issuing rights, options or warrants to holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the then applicable conversion price.

Pro Rata Distributions. If we distribute to the holders of common stock evidences of its indebtedness, assets, rights or warrants to subscribe for or purchase any security, then in each case the conversion price shall be determined by multiplying the conversion price by a fraction the numerator of which is the VWAP minus the then fair market value at such record date of the portion of the assets or evidence of indebtedness so distributed applicable to one outstanding share of the common stock as determined by the Board of Directors in good faith and the denominator of which is the VWAP on the record date,.
  
Fundamental Transaction. If we effect a merger, sell all or substantially all of our assets, any tender offer or exchange offer is completed pursuant to which holders of common stock are permitted to tender or exchange their shares for other securities, cash or property, or we effect any reclassification of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property (each, a “fundamental transaction”), then on subsequent conversion of the Series A Preferred Stock, the holder has the right to receive, for each share of common stock that would have been issuable on such conversion absent such fundamental transaction, the same kind and amount of securities, cash or property as the holder would have been entitled to receive on the occurrence of the fundamental transaction as if the holder had been, immediately prior to such fundamental transaction, the holder of common stock.
 
7. The Warrants
 
The Warrants entitle the holders, upon the effectiveness of the Reverse Split, to purchase up to an aggregate of 7,000,000 shares of Common Stock at an exercise price of $3.00 per share, subject to adjustment. The Warrants expire in five years following their issuance. 
 
Cashless Exercise.  The holders may make a cashless exercise, but not until February 26, 2009 and only when the resale of the warrant shares by the holder is not covered by an effective registration statement.
 
Maximum Exercise; 4.9% Limitation. The holder is not permitted to exercise the warrant to the extent that on the date of exercise the exercise would result in beneficial ownership by the holder and its affiliates of more than 4.9% of the outstanding shares of common stock on such date. This provision may not be waived or amended (the “4.9% Limitation”).
 
Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc. The exercise price of the warrants and the number of shares of common stock issuable on exercise of the warrants will be appropriately adjusted to reflect any stock dividend, stock split, stock distribution, combination of shares, reverse split, reclassification, recapitalization or other similar event affecting the number of outstanding shares.
 
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Adjustment for Reorganization, Consolidation, Merger, Etc. If we merge or consolidate with or into any other person, or are a party to any other corporate reorganization, and we are not the continuing or surviving entity, then, in each case, the holder of the warrant (on exercise at any time after the consummation of such transaction) will be entitled to receive, the stock and other securities and property (including cash) which the holder would have been entitled to receive if the holder had exercised the warrant immediately prior to the effectiveness of the transaction.
 
Sales of Common Stock at less than the Exercise Price; Weighted Average Adjustment. Subject to certain exceptions (including certain exempt issuances), if we sell or issue any common stock at a per share price, or warrants, options, convertible debt or equity securities with an exercise or conversion price per share, which is less than (i) $1.20, the Warrants’ exercise price will be adjusted concurrently with such issue or sale, to such lower price, or (ii) 2.00, but higher than $1.20 , the Warrants’ exercise price will be adjusted according to a weighted average formula as follows:

EP(1) = EP(1) x ((A+B) /(A+C))
EP(2) = the Warrant Exercise Price immediately after the adjustment;

For purposes of the foregoing formula:

EP(1) = Exercise Price immediately prior to the adjustment;

A = the total number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares, including the exercise or conversion of all options, warrants and other convertible securities.

B = the number of shares of Common Stock which the aggregate consideration received or receivable for the issuance of such additional shares would purchase at the Exercise Price immediately prior to the adjustment;

C = the number of such additional shares to be issued.

No exception from price adjustment for exempt issuances will be made if such exempt issuances exceed 5% of the outstanding shares of Common Stock for every two year period or if such exempt issuances are employee / consultant options only and exceed 7.5% of the outstanding shares of Common Stock for every two year period.
 
Mandatory Exercise. We have the right to require the outstanding Warrants on at least 35 days notice prior to the mandatory exercise date to exercise the Warrants, provided that (i) the market price of our Common Stock equals or exceeds $6.00 on each trading day in the 25 trading days period ending on the notice date, (ii) we have achieved our pre-tax income target for 2007 fiscal year, and (iii) the “Trading Volume” of our Common Stock equals or exceeds the 150,000 shares (which shall not be adjusted with Reverse Split.) “Target Volume” on each trading day in the twenty five (25) trading days in the period ending on the notice date , and (iv) a registration statement covering the sale by the holder of the shares of Common Stock issuable upon exercise of the Warrant is current and effective for the 25 trading days prior to the notice date and our right to mandate exercise only applies with respect to the warrant shares included in such registration statement. In the event that our mandate exercise of the Warrants would result in a violation of the 4.9% Limitation, we will not have the right to mandate such exercise of the Warrants to the extent that the exercise of the Warrants would result in such a violation.
 
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Item 5.02
Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.
 
On February 22, 2008, Terence F. Leong resigned as a director of the Company to purse other interests and Joseph I. Emas was elected as director of the Company.
 
Item 5.03
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
 
Pursuant to the Company’s Restated and Amended Articles of Incorporation, our Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting any series and the designation thereof. On February 22, 2008, pursuant to the written consent of the sole director of the Board of Directors of the Company, the Company filed with the Secretary of State of the state of Florida, (a) a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock to designate out of the 10,000,000 authorized shares of the Company’s Preferred Stock, par value $0.001 per share, a series of 1,000,000 shares of Series A Convertible Preferred Stock and (b) a Certificate of Designations, Preferences , Rights and Limitations of Series B Convertible Preferred Stock to designate out of the 10,000,000 authorized shares of the Company’s Preferred Stock, pave value $0.001 per share, a series of 7,000,000 shares of Series B Convertible Preferred Stock.

On February 13, 2008, the Company elected to change its year end from September 30 to December 31 with regard to which the Company filed a transition report on Form 10-QSB on February 14, 2008, which was amended on February 20, 2008.

Item 9.01
Financial Statements and Exhibits.

(d) The following exhibits are filed with this Current Report:
 
15

 
2.1 Share Exchange Agreement, dated as of February 22, 2008 by and among Pacific Industry Holding Group Co. Ltd. (“Pacific”), Terrence Leong, the Company and the shareholders of Pacific.

3.1 Certificate of Designations, Preferences and Rights of the Company’s Series A Convertible Preferred Stock.

3.2 Certificate of Designations, Preferences, Rights and Limitations of the Company’s Series B Convertible Preferred Stock.  
 
16


SIGNATURES
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: February 28, 2008
     
 
ENTECH ENVIRONMENTAL TECHNOLOGIES, INC.
   
 
 
 
 
 (Registrant) 
 
 
By:   /s/ Yongke Xue
 

    Yongke Xue,
 
Chief Executive Officer

17

 
EX-2.1 2 v105255_ex2-1.htm
SHARE EXCHANGE AGREEMENT


Pacific Industry Holding Group Co. Ltd.
 
FOR THE EXCHANGE OF
 
CAPITAL STOCK

OF

Entech environmental technologies, inc.

DATED AS OF FEBRUARY 22, 2008

 
 

 

SHARE EXCHANGE AGREEMENT

This SHARE EXCHANGE AGREEMENT, dated as of February 22, 2008 (the “Agreement”) by and among Pacific Industry Holding Group Co. Ltd., a Vanuatu corporation (“PACIFIC”), Terrence Leong, an individual residing at 221 Warren Street, Hudson, NY 12534 (“Leong”), Entech Environmental Technologies, Inc., a Florida corporation (the“SHELL”) and all of the shareholders of PACIFIC, whose names are set forth on Exhibit A attached hereto (“SHAREHOLDERS”).
 
WHEREAS, SHAREHOLDERS own 100% of the issued and outstanding shares of Common Stock of PACIFIC (the "PACIFIC Shares");
 
WHEREAS, SHAREHOLDERS believe it is in their best interest to exchange the PACIFIC Shares for shares of Series A Convertible Preferred Stock of SHELL, par value $0.001 per share (“SHELL Shares”), and SHELL believes it is in its best interests to acquire the PACIFIC Shares in exchange for SHELL Shares, upon the terms and subject to the conditions set forth in this Agreement; and
 
WHEREAS, it is the intention of the parties that: (i) SHELL shall acquire 100% of the PACIFIC Shares in exchange solely for the amount of SHELL Shares set forth herein; (ii) said exchange of shares shall qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the“Code”); and (iii) said exchange shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended and in effect on the date of this Agreement (the “Securities Act”)
 
NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto hereby agree as follows:
 
ARTICLE I
 
EXCHANGE OF SHARES FOR COMMON STOCK
 
Section 1.1 Agreement to Exchange PACIFIC Shares for SHELL Shares. On the Closing Date (as hereinafter defined) and upon the terms and subject to the conditions set forth in this Agreement, SHAREHOLDERS shall sell, assign, transfer, convey and deliver the PACIFIC Shares (representing 100% of the issued and outstanding PACIFIC Shares), to SHELL, and SHELL shall accept the PACIFIC Shares from the SHAREHOLDERS in exchange for the issuance to the SHAREHOLDERS of the number of SHELL Shares set forth opposite the names of the SHAREHOLDERS on Exhibit A hereto.

Section 1.2 Capitalization. On the Closing Date, immediately before the transactions to be consummated pursuant to this Agreement, SHELL shall have authorized (a) 100,000,000 shares of Common Stock, par value $0.001 per share, of which 87,281,218 shares shall be issued and outstanding, all of which are duly authorized, validly issued and fully paid and the detailed shareholdings of which are more particularly set out in Exhibit B hereto; and (b) 10,000,000 shares of Preferred Stock, $0.001 par value, of which no shares are issued or outstanding.
 
 
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Section 1.3 Closing. The closing of the exchange to be made pursuant to this Agreement (the "Closing") shall take place at 10:00 a.m. E.D.T. on the second business day after the conditions to closing set forth in Articles V and VI have been satisfied or waived, or at such other time and date as the parties hereto shall agree in writing but no later than February 29, 2008 (the "Closing Date"), at the offices of Guzov Ofsink, LLC, 600 Madison Avenue, 14th Floor, New York, New York 10022. At the Closing, SHAREHOLDERS shall (i) deliver to SHELL the stock certificates representing 100% of the PACIFIC Shares, duly endorsed in blank for transfer or accompanied by appropriate stock powers duly executed in blank. In full consideration and exchange for the PACIFIC Shares and payment, SHELL shall issue and exchange with SHAREHOLDERS 1,000,000 SHELL Shares representing approximately 1,000 SHELL Shares for each PACIFIC Share exchanged.
 
1.4  Tax Treatment. The exchange described herein is intended to comply with Section 368(a)(1)(B) of the Code, and all applicable regulations thereunder. In order to ensure compliance with said provisions, the parties agree to take whatever steps may be necessary, including, but not limited to, the amendment of this Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SHELL

SHELL and Leong hereby represent, warrant and agree as follows:

Section 2.1 Corporate Organization

a. SHELL is a corporation duly organized, validly existing and in good standing under the laws of Florida, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted and is duly qualified to do business in good standing in each jurisdiction in which the nature of the business conducted by SHELL or the ownership or leasing of its properties makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a material adverse effect on the business, operations, properties, assets, condition or results of operation of SHELL (a "SHELL Material Adverse Effect");

b. Copies of the Articles of Incorporation and By-laws of SHELL, with all amendments thereto to the date hereof, have been furnished to PACIFIC and the SHAREHOLDERS, and such copies are accurate and complete as of the date hereof. The minute books of SHELL are current as required by law, contain the minutes of all meetings of the Board of Directors and shareholders of SHELL from its date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the Board of Directors and shareholders of SHELL.
 
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Section 2.2 Capitalization of SHELL. The authorized capital stock of SHELL consists of (a) 100,000,000 shares of Common Stock, par value $0.001 per share, of which 87,281,218 shares are issued and outstanding, all of which are duly authorized, validly issued and fully paid and the detailed shareholdings of which are more particularly set out in Exhibit B hereto; and (b) 10,000,000 shares of Preferred Stock, $0.001 par value, of which none are issued or outstanding. The parties agree that they have been informed of the issuances of these SHELL Shares, and that all such issuances of SHELL Shares pursuant to this Agreement will be in accordance with the provisions of this Agreement. All of the SHELL Shares to be issued pursuant to this Agreement have been duly authorized and will be validly issued, fully paid and non-assessable and no personal liability will attach to the ownership thereof and in each instance, have been issued in accordance with the registration requirements of applicable securities laws. As of the date of this Agreement there are and as of the Closing Date, there will be, no outstanding options, warrants, agreements, commitments, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire any shares of capital stock or any un-issued or treasury shares of capital stock of SHELL.

Section 2.3 Subsidiaries and Equity Investments. SHELL has no subsidiaries or equity interest in any corporation, partnership or joint venture.

Section 2.4 Authorization and Validity of Agreements. SHELL has all corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby and upon the execution and delivery by PACIFIC and the PACIFIC Shareholders and the performance of their obligations herein, will constitute, a legal, valid and binding obligation of SHELL. The execution and delivery of this Agreement by SHELL and the consummation by SHELL of the transactions contemplated hereby have been duly authorized by all necessary corporate action of SHELL, and no other corporate proceedings on the part of SHELL are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.

Section 2.5 No Conflict or Violation. The execution, delivery and performance of this Agreement by SHELL do not and will not violate or conflict with any provision of its Articles of Incorporation or By-laws, and does not and will not violate any provision of law, or any order, judgment or decree of any court or other governmental or regulatory authority, nor violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under, or give to any other entity any right of termination, amendment, acceleration or cancellation of, any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which SHELL is a party or by which it is bound or to which any of their respective properties or assets is subject, nor will it result in the creation or imposition of any lien, charge or encumbrance of any kind whatsoever upon any of the properties or assets of SHELL, nor will it result in the cancellation, modification, revocation or suspension of any of the licenses, franchises, permits to which SHELL is bound.

Section 2.6 Consents and Approvals. No consent, waiver, authorization or approval of any governmental or regulatory authority, domestic or foreign, or of any other person, firm or corporation, is required in connection with the execution and delivery of this Agreement by SHELL or the performance by SHELL of its obligations hereunder.
 
 
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Section 2.7 Absence of Certain Changes or Events. Since its inception:

a.  SHELL has operated in the ordinary course of business consistent with past practice and there has not been any material adverse change in the assets, properties, business, operations, prospects, net income or condition, financial or otherwise of SHELL. As of the date of this Agreement, SHELL does not know or have reason to know of any event, condition, circumstance or prospective development which threatens or may threaten to have a material adverse effect on the assets, properties, operations, prospects, net income or financial condition of SHELL;

b.  there has not been any declaration, setting aside or payment of dividends or distributions with respect to shares of capital stock of SHELL or any redemption, purchase or other acquisition of any capital stock of SHELL or any other of SHELL’s securities; and
 
Section 2.8 Disclosure. This Agreement and any certificate attached hereto or delivered in accordance with the terms hereby by or on behalf of SHELL in connection with the transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.

Section 2.9 Litigation. To the knowledge of the Company, no litigation, claim, or other proceeding before any court or governmental agency is pending or to the knowledge of the Company, threatened against the Company, the prosecution or outcome of which may have a Material Adverse Effect (as defined below). There is no action, suit, proceeding or investigation pending or threatened against the Company or any subsidiary that may affect the validity of this Agreement or the right of SHELL to enter into this Agreement or to consummate the transactions contemplated hereby. “Material Adverse Effect” means any adverse effect on the business, operations, properties or financial condition of the Company or any of its Subsidiaries that is material and adverse to the Company and its Subsidiaries taken as a whole and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company or any Subsidiary to perform any of its material obligations under this Agreement, the Registration Rights Agreement or the Warrants or to perform its obligations under any other material agreement.
 
Section 2.10 Securities Laws. SHELL has complied in all respects with applicable federal and state securities laws, rules and regulations, including the Sarbanes Oxley Act of 2002, as such laws, rules and regulations apply to SHELL and its securities; and (b) all shares of capital stock of the Company have been issued in accordance with applicable federal and state securities laws, rules and regulations. There are no stop orders in effect with respect to any of the Company’s securities.
 
 
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Section 2.11 Tax Returns, Payments and Elections. Schedule 2.11 lists the status of all tax returns of the SHELL, statements, reports, declarations and other forms and documents that are required to be prepared and/or filed by law as of the Closing Date. As of the date hereof and the Closing Date, there are no taxes incurred and unpaid. Leong will, post-closing, assist in facilitating the filing of all unfilled tax returns.

Section 2.12 ’34 Act Reports. None of SHELL’s filings with the SEC, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading, in light of the circumstances in which they were made.

 
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Section 2.13  Market Makers. SHELL has at least three (3) market makers in its Common Stock.

Section 2.14 Brokers’ Fees and Commissions.  Neither the SHELL nor any of its officers, directors, employees, stockholders, agents or representatives, nor Leong have employed any investment banker, broker, or finder in connection with the transactions contemplated by this Agreement and no such person or entity is entitled to a fee with respect to the transactions contemplated by this Agreement.

Section 2.15  Convertible Securities.  Schedule 2.15 hereto contains a true and accurate listing of all outstanding options, warrants and securities convertible into, or exchangeable for, Common Stock of the Shell and the number of shares of Common Stock for which each is convertible, exercisable or exchangeable.

Section 2.16 Survival. Each of the representations and warranties set forth in this Article II shall be deemed represented and made by SHELL and Leong at the Closing as if made at such time and shall survive the Closing for a period terminating on the second anniversary of the date of this Agreement.
 
ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PACIFIC AND SHAREHOLDERS

PACIFIC and each of the SHAREHOLDERS, severally, represent, warrant and agree as follows:

Section 3.1 Corporate Organization.

a. PACIFIC is a corporation with no prior business activities. It is duly organized, validly existing and in good standing under the laws of the Republic of Vanuatu and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted and is duly qualified to do business, is in good standing in each jurisdiction wherein the nature of the business conducted by PACIFIC or the ownership or leasing of its properties makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a material adverse effect on the business, operations, properties, assets, condition or results of operation of PACIFIC (a "PACIFIC Material Adverse Effect"). As of the date of this Agreement, PACIFIC owns all of the issued and outstanding equity or voting interests in Shaanxi Tianren Organic Food Co., Ltd. (“Tianren”). Tianren is duly organized, validly existing and in good standing under the laws of the Peoples’ Republic of China (“PRC”) and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted and is duly qualified to do business, is in good standing in each jurisdiction wherein the nature of the business conducted by Tianren or the ownership or leasing of its properties makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a material adverse effect on the business, operations, properties, assets, condition or results of operation of Tianren (a "Tianren Material Adverse Effect")
 
 
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b. Copies of the Certificate of Incorporation and By-laws of PACIFIC and Tianren, with all amendments thereto to the date hereof, have been furnished to SHELL, and such copies are accurate and complete as of the date hereof. The minute books of PACIFIC are current as required by law, contain the minutes of all meetings of the Board of Directors and shareholders of PACIFIC, and committees of the Board of Directors of PACIFIC from the date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the Board of Directors, shareholders and committees of the Board of Directors of PACIFIC.

Section 3.2 Capitalization of PACIFIC; Title to the PACIFIC Shares. On the Closing Date, immediately before the transactions to be consummated pursuant to this Agreement, PACIFIC shall have authorized one hundred (100) PACIFIC Shares, of which 100 PACIFIC Shares will be issued and outstanding. The PACIFIC Shares are the sole outstanding shares of capital stock of PACIFIC, and there are no outstanding options, warrants, agreements, commitments, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire any shares of capital stock or other equity or voting interest or any unissued or treasury shares of capital stock of PACIFIC. As of the date hereof and on the Closing Date, each SHAREHOLDER owns and will own the PACIFIC Shares free and clear of any liens, claims or encumbrances and has and will have the right to transfer the PACIFIC Shares without consent of any other person or entity.

Section 3.3 Subsidiaries and Equity Investments; Assets. As of the date hereof and on the Closing Date, PACIFIC owns and will own 99% of the equity or voting interests in Tianren. PACIFIC does not and will not directly or indirectly, own any other shares of capital stock or any other equity interest in any entity or any right to acquire any shares or other equity interest in any entity and PACIFIC does not and will not have any assets or liabilities. As of the date hereof and on Closing Date, Tianren does not and will not directly or indirectly, own any shares of capital stock or any other equity interest in any entity or any right to acquire any shares or other equity interest in any entity. As of the date hereof and on the Closing Date, there are and will be no outstanding options, warrants, agreements, commitments, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire any shares of capital stock or other equity or voting interest in Tianren.

Section 3.4 Authorization and Validity of Agreements. PACIFIC has all corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by PACIFIC and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of PACIFIC are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The SHAREHOLDERS have approved this Agreement on behalf of PACIFIC and no other stockholder approvals are required to consummate the transactions contemplated hereby. Each SHAREHOLDER who is a natural person is over the age of 21, is competent to execute this Agreement, and has the power to execute and perform this Agreement. The execution and delivery of this Agreement by each SHAREHOLDER which is not a natural person (“Entity Shareholder”) and the consummation of the transactions contemplated hereby by each Entity Shareholder have been duly authorized by all necessary action by the Entity Shareholder and no other proceedings on the part of PACIFIC or any SHAREHOLDER are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
 
 
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Section 3.5 No Conflict or Violation. The execution, delivery and performance of this Agreement by PACIFIC or any SHAREHOLDER does not and will not violate or conflict with any provision of the constituent documents of PACIFIC, and does not and will not violate any provision of law, or any order, judgment or decree of any court or other governmental or regulatory authority, nor violate, result in a breach of or constitute (with due notice or lapse of time or both) a default under or give to any other entity any right of termination, amendment, acceleration or cancellation of any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which PACIFIC or any SHAREHOLDER is a party or by which it is bound or to which any of its respective properties or assets is subject, nor result in the creation or imposition of any lien, charge or encumbrance of any kind whatsoever upon any of the properties or assets of PACIFIC or any SHAREHOLDER, nor result in the cancellation, modification, revocation or suspension of any of the licenses, franchises, permits to which PACIFIC or any SHAREHOLDER is bound.

Section 3.6 Investment Representations. (a) The SHELL Shares will be acquired hereunder solely for the account of the SHAREHOLDERS, for investment, and not with a view to the resale or distribution thereof. Each SHAREHOLDER understands and is able to bear any economic risks associated with such SHAREHOLDER’S investment in the SHELL Shares. Each SHAREHOLDER has had full access to all the information such SHAREHOLDER considers necessary or appropriate to make an informed investment decision with respect to the SHELL Shares to be acquired under this Agreement. Each SHAREHOLDER further has had an opportunity to ask questions and receive answers from SHELL’s directors regarding SHELL and to obtain additional information (to the extent SHELL’s directors possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such SHAREHOLDER or to which such SHAREHOLDER had access. Each SHAREHOLDER is at the time of the offer and execution of this Agreement, domiciled and resident outside the United States (a “PRC Shareholder”) and is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act).

(b) No PRC Shareholder, nor any affiliate of any PRC Shareholder, nor any person acting on behalf of any PRC Shareholder or any behalf of any such affiliate, has engaged or will engage in any activity undertaken for the purpose of, or that reasonably could be expected to have the effect of, conditioning the markets in the United States for the SHELL Shares, including, but not limited to, effecting any sale or short sale of securities through any PRC Shareholder or any of affiliate of any PRC Shareholder prior to the expiration of any restricted period contained in Regulation S promulgated under the Securities Act (any such activity being defined herein as a “Directed Selling Effort”). To the best knowledge of each of the PRC Shareholders, this Agreement and the transactions contemplated herein are not part of a plan or scheme to evade the registration provisions of the Securities Act, and the SHELL Shares are being acquired for investment purposes by the PRC Shareholders. Each PRC Shareholder agrees that all offers and sales of SHELL Shares from the date hereof and through the expiration of the any restricted period set forth in Rule 903 of Regulation S (as the same may be amended from time to time hereafter) shall not be made to U.S. Persons or for the account or benefit of U.S. Persons and shall otherwise be made in compliance with the provisions of Regulation S and any other applicable provisions of the Securities Act. Neither any PRC Shareholder nor the representatives of any PRC Shareholder have conducted any Directed Selling Effort as that term is used and defined in Rule 902 of Regulation S and no PRC Shareholder nor any representative of any PRC Shareholder will engage in any such Directed Selling Effort within the United States through the expiration of any restricted period set forth in Rule 903 of Regulation S.
 
 
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Section 3.7 Brokers’ Fees. No SHAREHOLDER has any liability to pay any fees or commissions or other consideration to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

Section 3.8 Disclosure. This Agreement, the schedules hereto and any certificate attached hereto or delivered in accordance with the terms hereby by or on behalf of PACIFIC or the SHAREHOLDERS in connection with the transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.

Section 3.9 Survival. Each of the representations and warranties set forth in this Article III shall be deemed represented and made by PACIFIC and the SHAREHOLDERS at the Closing as if made at such time and shall survive the Closing for a period terminating on the second anniversary of the date of this Agreement.
 
 
ARTICLE IV

COVENANTS

Section 4.1 Certain Changes and Conduct of Business.

a. From and after the date of this Agreement and until the Closing Date, SHELL shall conduct its business solely in the ordinary course consistent with past practices and, in a manner consistent with all representations, warranties or covenants of SHELL, and without the prior written consent of PACIFIC will not, except as required or permitted pursuant to the terms hereof:

i.  
make any material change in the conduct of its businesses and/or operations or enter into any transaction other than in the ordinary course of business consistent with past practices;
 
 
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ii.  
make any change in its Articles of Incorporation or By-laws; issue any additional shares of capital stock or equity securities or grant any option, warrant or right to acquire any capital stock or equity securities or issue any security convertible into or exchangeable for its capital stock or alter in any material term of any of its outstanding securities or make any change in its outstanding shares of capital stock or its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise;
 
                                                         iii. A. incur, assume or guarantee any indebtedness for borrowed money, issue any notes, bonds, debentures or other corporate securities or grant any option, warrant or right to purchase any thereof, except pursuant to transactions in the ordinary course of business consistent with past practices; or
 
 
B.
issue any securities convertible or exchangeable for debt or equity securities of SHELL;

iv.  
make any sale, assignment, transfer, abandonment or other conveyance of any of its assets or any part thereof, except pursuant to transactions in the ordinary course of business consistent with past practice;

v.  
subject any of its assets, or any part thereof, to any lien or suffer such to be imposed other than such liens as may arise in the ordinary course of business consistent with past practices by operation of law which will not have an SHELL Material Adverse Effect;

vi.  
acquire any assets, raw materials or properties, or enter into any other transaction, other than in the ordinary course of business consistent with past practices;

vii.  
enter into any new (or amend any existing) employee benefit plan, program or arrangement or any new (or amend any existing) employment, severance or consulting agreement, grant any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or grant any increase in the compensation payable or to become payable to any employee, except in accordance with pre-existing contractual provisions or consistent with past practices;
 
 
- 11 -

 
 
viii.  
make or commit to make any material capital expenditures;

ix.  
pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of its affiliates;

x.  
guarantee any indebtedness for borrowed money or any other obligation of any other person;

xi.  
fail to keep in full force and effect insurance comparable in amount and scope to coverage maintained by it (or on behalf of it) on the date hereof;

xii.  
take any other action that would cause any of the representations and warranties made by it in this Agreement not to remain true and correct in all material aspect;

xiii.  
make any material loan, advance or capital contribution to or investment in any person;

xiv.  
make any material change in any method of accounting or accounting principle, method, estimate or practice;

xv.  
settle, release or forgive any claim or litigation or waive any right;

xvi.  
commit itself to do any of the foregoing.

b. From and after the date of this Agreement, PACIFIC will and PACIFIC will cause Tianren to:

1.  
continue to maintain, in all material respects, its properties in accordance with present practices in a condition suitable for its current use;

2.  
file, when due or required, federal, state, foreign and other tax returns and other reports required to be filed and pay when due all taxes, assessments, fees and other charges lawfully levied or assessed against it, unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted;

3.  
continue to conduct its business in the ordinary course consistent with past practices;

4.  
keep its books of account, records and files in the ordinary course and in accordance with existing practices; and
 
 
- 12 -

 
 
5. continue to maintain existing business relationships with suppliers.

c. From and after the date of this Agreement, PACIFIC will not and will ensure that Tianren does not:

xvii.  
make any material change in the conduct of its businesses and/or operations or enter into any transaction other than in the ordinary course of business consistent with past practices;

xviii.  
make any change in its Business License, Bylaws or other governing documents; issue any additional shares of capital stock or equity securities or grant any option, warrant or right to acquire any capital stock or equity securities or issue any security convertible into or exchangeable for its capital stock or alter in any material term of any of its outstanding securities or make any change in its outstanding shares of capital stock or its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise;
 
                                                        xix. A. incur, assume or guarantee any indebtedness for borrowed money, issue any notes, bonds, debentures or other corporate securities or grant any option, warrant or right to purchase any thereof, except pursuant to transactions in the ordinary course of business consistent with past practices; or
 
 
B.
issue any securities convertible or exchangeable for debt or equity securities of PACIFIC or Tianren;

xx.  
make any sale, assignment, transfer, abandonment or other conveyance of any of its assets or any part thereof, except pursuant to transactions in the ordinary course of business consistent with past practice;

xxi.  
subject any of its assets, or any part thereof, to any lien or suffer such to be imposed other than such liens as may arise in the ordinary course of business consistent with past practices by operation of law which will not have an PACIFIC Material Adverse Effect;

xxii.  
acquire any assets, raw materials or properties, or enter into any other transaction, other than in the ordinary course of business consistent with past practices;
 
 
- 13 -

 
 
xxiii.  
enter into any new (or amend any existing) employee benefit plan, program or arrangement or any new (or amend any existing) employment, severance or consulting agreement, grant any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or grant any increase in the compensation payable or to become payable to any employee, except in accordance with pre-existing contractual provisions or consistent with past practices;

xxiv.  
make or commit to make any material capital expenditures;

xxv.  
pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of its affiliates;

xxvi.  
guarantee any indebtedness for borrowed money or any other obligation of any other person;

xxvii.  
fail to keep in full force and effect insurance comparable in amount and scope to coverage maintained by it (or on behalf of it) on the date hereof;

xxviii.  
take any other action that would cause any of the representations and warranties made by it in this Agreement not to remain true and correct in all material aspect;

xxix.  
make any material loan, advance or capital contribution to or investment in any person;

xxx.  
make any material change in any method of accounting or accounting principle, method, estimate or practice;

xxxi.  
settle, release or forgive any claim or litigation or waive any right;

xxxii.  
commit itself to do any of the foregoing.
 
Section 4.2 Access to Properties and Records. PACIFIC shall afford SHELL’s accountants, counsel and authorized representatives, and SHELL shall afford to PACIFIC's accountants, counsel and authorized representatives full access during normal business hours throughout the period prior to the Closing Date (or the earlier termination of this Agreement) to all of such parties’ properties, books, contracts, commitments and records and, during such period, shall furnish promptly to the requesting party all other information concerning the other party's business, properties and personnel as the requesting party may reasonably request, provided that no investigation or receipt of information pursuant to this Section 4.2 shall affect any representation or warranty of or the conditions to the obligations of any party.
 
 
- 14 -

 

Section 4.3 Negotiations. From and after the date hereof until the earlier of the Closing or the termination of this Agreement, no party to this Agreement nor its officers or directors (subject to such director's fiduciary duties) nor anyone acting on behalf of any party or other persons shall, directly or indirectly, encourage, solicit, engage in discussions or negotiations with, or provide any information to, any person, firm, or other entity or group concerning any merger, sale of substantial assets, purchase or sale of shares of capital stock or similar transaction involving any party. A party shall promptly communicate to any other party any inquiries or communications concerning any such transaction which they may receive or of which they may become aware of.

Section 4.4 Consents and Approvals. The parties shall:

i.  
use their reasonable commercial efforts to obtain all necessary consents, waivers, authorizations and approvals of all governmental and regulatory authorities, domestic and foreign, and of all other persons, firms or corporations required in connection with the execution, delivery and performance by them of this Agreement; and

ii.  
diligently assist and cooperate with each party in preparing and filing all documents required to be submitted by a party to any governmental or regulatory authority, domestic or foreign, in connection with such transactions and in obtaining any governmental consents, waivers, authorizations or approvals which may be required to be obtained connection in with such transactions.

Section 4.5 Public Announcement. Unless otherwise required by applicable law, the parties hereto shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement and shall not issue any such press release or make any such public statement prior to such consultation.

Section 4.6 Stock Issuance. From and after the date of this Agreement until the Closing Date, none of SHELL, PACIFIC nor Tianren shall issue any additional shares of its capital stock.

Section 4.7 Tax Returns. Within 30 days following the signing of this Agreement, Leong, in his capacity as the former Chief Executive Officer of the SHELL prior to the consummation of the transactions contemplated hereunder, will cause all tax returns of the SHELL for any and all periods prior to the Closing Date (the “Historical Tax Returns”) that are not prepared and/or filed as of the date hereof to be prepared and filed and shall be responsible for any and all expenses and liabilities related thereto. SHELL will authorize Leong to sign all Historical Tax Returns on behalf of SHELL.
 
 
- 15 -

 

Section 4.8 Notwithstanding anything to the contrary contained herein, it is herewith understood and agreed that both PACIFIC and SHELL may enter into and conclude agreements and/or financing transactions as same relate to and/or are contemplated by any separate written agreements either: (a) annexed hereto as exhibits; or (b) entered into by SHELL with PACIFIC executed by both parties subsequent to the date hereof. These Agreements shall become, immediately upon execution, part of this Agreement and subject to all warranties, representations and conditions contained herein.
 
 
ARTICLE V

CONDITIONS TO OBLIGATIONS OF PACIFIC AND SHAREHOLDERS

The obligations of PACIFIC and the SHAREHOLDERS to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by both PACIFIC and the SHAREHOLDERS in their sole discretion:

Section 5.1 Representations and Warranties of SHELL. All representations and warranties made by SHELL in this Agreement shall be true and correct on and as of the Closing Date as if again made by SHELL as of such date.

Section 5.2 Agreements and Covenants. SHELL shall have performed and complied in all material respects to all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

Section 5.3 Consents and Approvals. Consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement shall be in full force and effect on the Closing Date.

Section 5.4 No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which declares this Agreement invalid in any respect or prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of SHELL shall be in effect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person, or entity which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement.

Section 5.5 Other Closing Documents. PACIFIC shall have received such other certificates, instruments and documents in confirmation of the representations and warranties of SHELL or in furtherance of the transactions contemplated by this Agreement as PACIFIC or its counsel may reasonably request.
 
 
- 16 -

 

Section 5.6  Treasury Shares. SHELL shall have canceled all its issued treasury shares.
 
 
ARTICLE VI
 
CONDITIONS TO OBLIGATIONS OF SHELL

The obligations of SHELL to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by SHELL in its sole discretion:

Section 6.1 Representations and Warranties of PACIFIC and SHAREHOLDERS. All representations and warranties made by PACIFIC and SHAREHOLDERS in this Agreement shall be true and correct on and as of the Closing Date as if again made by PACIFIC on and as of such date.

Section 6.2 Agreements and Covenants. PACIFIC and SHAREHOLDERS shall have performed and complied in all material respects to all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

Section 6.3 Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement, shall have been duly obtained and shall be in full force and effect on the Closing Date.

Section 6.4 No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares this Agreement invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of PACIFIC or Tianren, taken as a whole, shall be in effect; and no action or proceeding before any court or government or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person, or entity which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement.

Section 6.5. Other Closing Documents. SHELL shall have received such other certificates, instruments and documents in confirmation of the representations and warranties of PACIFIC or in furtherance of the transactions contemplated by this Agreement as SHELL or its counsel may reasonably request.
 
 
- 17 -

 
 
ARTICLE VII

TERMINATION AND ABANDONMENT

SECTION 7.1 Methods of Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time before the Closing:

a. By the mutual written consent of SHAREHOLDERS, PACIFIC and SHELL;
 
b.  By SHELL, upon a material breach of any representation, warranty, covenant or agreement on the part of PACIFIC or the SHAREHOLDERS set forth in this Agreement, or if any representation or warranty of PACIFIC or the SHAREHOLDERS shall become untrue, in either case such that any of the conditions set forth in Article VI hereof would not be satisfied (a "PACIFIC Breach"), and such breach shall, if capable of cure, has not been cured within ten (10) days after receipt by the party in breach of a notice from the non-breaching party setting forth in detail the nature of such breach;

c.  By PACIFIC, upon a material breach of any representation, warranty, covenant or agreement on the part of SHELL set forth in this Agreement, or, if any representation or warranty of SHELL shall become untrue, in either case such that any of the conditions set forth in Article V hereof would not be satisfied (a "SHELL Breach"), and such breach shall, if capable of cure, not have been cured within ten (10) days after receipt by the party in breach of a written notice from the non-breaching party setting forth in detail the nature of such breach;

d.  By either SHELL or PACIFIC, if the Closing shall not have consummated before ninety (90) days after the date hereof; provided, however, that this Agreement may be extended by written notice of either PACIFIC or SHELL, if the Closing shall not have been consummated as a result of SHELL or PACIFIC having failed to receive all required regulatory approvals or consents with respect to this transaction or as the result of the entering of an order as described in this Agreement; and further provided, however, that the right to terminate this Agreement under this Section 7.1(d) shall not be available to any party whose failure to fulfill any obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before this date.

e.  By either PACIFIC or SHELL if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use its best efforts to lift), which permanently restrains, enjoins or otherwise prohibits the transactions contemplated by this Agreement.
 
 
- 18 -

 

Section 7.2 Procedure Upon Termination. In the event of termination and abandonment of this Agreement by PACIFIC or SHELL pursuant to Section 7.1, written notice thereof shall forthwith be given to the other parties and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action. If this Agreement is terminated as provided herein, no party to this Agreement shall have any liability or further obligation to any other party to this Agreement; provided, however, that no termination of this Agreement pursuant to this Article VII shall relieve any party of liability for a breach of any provision of this Agreement occurring before such termination.
 
ARTICLE VIII

INDEMNIFICATION

Section 8.1 Indemnification.  Leong agrees to indemnify, defend and hold PACIFIC, SHELL and their officers, directors, employees, agents, consultants and assigns harmless from and against any claims, losses or expenses (including reasonable attorney’s fees) resulting from or arising out of breach by Leong or SHELL of any of their representations or warranties under this Agreement.

ARTICLE IX

MISCELLANEOUS PROVISIONS

Section 9.1 Survival of Provisions. The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or before the Closing Date) shall survive the Closing Date and the consummation of the transactions contemplated by this Agreement, subject to Sections 2.14, 3.9 and 9.1. In the event of a breach of any of such representations, warranties or covenants, the party to whom such representations, warranties or covenants have been made shall have all rights and remedies for such breach available to it under the provisions of this Agreement or otherwise, whether at law or in equity, regardless of any disclosure to, or investigation made by or on behalf of such party on or before the Closing Date. Notwithstanding the foregoing, each party’s liability to the other for breach of any representation, warranty or covenant shall not exceed, in the aggregate, $500,000.

Section 9.2 Publicity. No party shall cause the publication of any press release or other announcement with respect to this Agreement or the transactions contemplated hereby without the consent of the other parties, unless a press release or announcement is required by law. If any such announcement or other disclosure is required by law, the disclosing party agrees to give the non-disclosing parties prior notice and an opportunity to comment on the proposed disclosure.
 
 
- 19 -

 

Section 9.3 Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns; provided, however, that no party shall assign or delegate any of the obligations created under this Agreement without the prior written consent of the other parties.

Section 9.4 Fees and Expenses. Except as otherwise expressly provided in this Agreement, all legal and other fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs or expenses.

Section 9.5 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and delivered personally or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses:

If to PACIFIC or the SHAREHOLDERS, to:

Guzov Ofsink, LLC
600 Madison Avenue, 14th Floor
New York, New York 10022
Attn: Darren Ofsink, Esq.
Fax: 212-688-7273

If to SHELL, to:

Joseph I. Emas, Attorney at Law
1224 Washington Avenue
Miami Beach, Florida 33139
Fax: (305) 531-1274

If to Leong, to:

221 Warren Street,
Hudson, NY 12534
Walker Street Associates
Email: tfleong@walkerstreet.com
Tel: 518.828.4988 and 212.279.1789
 
or to such other persons or at such other addresses as shall be furnished by any party by like notice to the others, and such notice or communication shall be deemed to have been given or made as of the date so delivered or mailed. No change in any of such addresses shall be effective insofar as notices under this Section 9.5 are concerned unless such changed address is located in the United States of America and notice of such change shall have been given to such other party hereto as provided in this Section 9.5
 
 
- 20 -

 

Section 9.6 Entire Agreement. This Agreement, together with the exhibits hereto, represents the entire agreement and understanding of the parties with reference to the transactions set forth herein and no representations or warranties have been made in connection with this Agreement other than those expressly set forth herein or in the exhibits, certificates and other documents delivered in accordance herewith. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement.

Section 9.7 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible so as to be valid and enforceable.

Section 9.8 Titles and Headings. The Article and Section headings contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof.

Section 9.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

Section 9.10 Convenience of Forum; Consent to Jurisdiction. The parties to this Agreement, acting for themselves and for their respective successors and assigns, without regard to domicile, citizenship or residence, hereby expressly and irrevocably elect as the sole judicial forum for the adjudication of any matters arising under or in connection with this Agreement, and consent and subject themselves to the jurisdiction of, the courts of the State of New York located in County of New York, and/or the United States District Court for the Southern District of New York, in respect of any matter arising under this Agreement. Service of process, notices and demands of such courts may be made upon any party to this Agreement by personal service at any place where it may be found or giving notice to such party as provided in Section 9.5.

Section 9.11 Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereto, this being in addition to any other remedy to which they are entitled at law or in equity.
 
 
- 21 -

 

Section 9.12 Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of New York without giving effect to the choice of law provisions thereof.

Section 9.13 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
 
 
Pacific Industry Holding Group Co. Ltd.

By:  /s/ Yongke Xue

Name: Yongke Xue
Title: Chief Executive Officer
 
 
ENTECH ENVIRONMENTAL TECHNOLOGIES, INC.
 

By:  /s/ Terrence Leong

Name: Terrence Leong
Title: Chief Executive Officer
 
TERRENCE LEONG


By:  /s/ Terrence Leong


 
- 22 -

 

PACIFIC SHAREHOLDERS:

FANCYLIGHT LIMITED


By:  /s/ Li Hong Wei

Name: Li Hong Wei
Title: Director

WINSUM LIMITED
 

By:  /s/ An Sixiao

Name: An Sixiao
Title: Director


 
- 23 -

 
 
EXHIBIT A
 
Name of SHAREHOLDER
Number of PACIFIC Shares Being Exchanged
Number of SHELL Shares to be Received
     
Fancylight Limited
80
800,000
Winsun Limited
20
100,000*
China Tianren Organic Food Holding Company Ltd. *
 
100,000*
 
 
* Winsun Limited is entitled to 200,000 shares of SHELL Shares in exchange for 20 shares it holds in Pacific immediately prior to the consummation of this Agreement. As a result of the consummation of the transactions contemplated under this Agreement, Winsun designates China Tianren Organic Food Holding Company Ltd. to receive 100,000 shares of SHELL Shares and Winsun will receive 100,000 SHELL Shares.

 
- 24 -

 

Exhibit B
 
 
Number of Shares of
SHELL Shareholders
Common Stock
 
SHAREHOLDER DETAIL LIST
 
ENTECH ENVIRONMENTAL TECH
 
As Of:Wednesday, February 06, 2008
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
GERALD R. BARRICK
             
1716 BAKER ST
             
SAN FRANCISCO, CA 94115
             
 
2029
5/12/2004
COMMON
RESTRICTED
20,000
 
RESTRICTED FEDERAL
 
2080
11/12/2004
COMMON
RESTRICTED
20,000
 
RESTRICTED FEDERAL
       
Total Active:
40,000
   
DAVID BATTEN
             
860 5TH AVE.
             
# 19B
             
NEW YORK, NY 10021
             
 
2161
2/14/2007
COMMON
FREE
303,702
 
REMOVE LEGEND 144
       
Total Active:
303,702
   
MICHAEL BATTISA, JR.
             
1719 SW MOCKINGBIRD DR.
             
PORT ST. LUCIE, FL 34986
             
 
1001
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
SERAFINA BATTISTA
             
1719 SW MOCKINGBIRD DR
             
PORT LUCIE, FL 34986
             
 
1002
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
MIKE BAUMGAERTEL
             
7469 SVL BOX
             
VICTORVILLE, CA 92392
             
 
2059
6/16/2004
COMMON
RESTRICTED
50,000
 
RESTRICTED FEDERAL
       
Total Active:
50,000
   
 
 
 
- 25 -

 
 

SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
JAMES R BINGHAM
             
2746 W LA MIRADA DR
             
RIALTO, CA, 92377
             
 
2013
4/20/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
BIRCH ADVISORS LTD
             
MICHAEL MORRIS
             
C/O VERTICAL CAPITAL
             
NEW YORK, NY 10022
             
 
2122
7/18/2005
COMMON
RESTRICTED
400,000
 
RESTRICTED FEDERAL
       
Total Active:
400,000
   
JOHN M. BRAZIER
             
5001 102 LANE
             
KIRKLAND, WA 98033
             
 
2120
6/16/2005
COMMON
RESTRICTED
16,667
 
RESTRICTED FEDERAL
 
2040
5/12/2004
COMMON
RESTRICTED
33,333
 
RESTRICTED FEDERAL
       
Total Active:
50,000
   
STEPHEN MICHAEL BRAZIER
             
2821 SECOND AVE STE 1001
             
SEATTLE, WA 98121
             
 
2039
5/12/2004
COMMON
RESTRICTED
33,333
 
RESTRICTED FEDERAL
       
Total Active:
33,333
   
KENNETH D BURDICK
             
1723 SW MOCKINGBIRD DR
             
PORT ST LUCIE, FL 34986
             
 
1004
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
ROSE BURDICK
             
1723 SW MOCKINGBIRD DR
             
PORT ST LUCIE, FL 34986
             
 
1005
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
 

 
- 26 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
CEDE & CO.
             
P.O.BOX 222, ,BOWLING GREEN STATION
             
NEW YORK, NY 10274
             
 
2072
7/2/2004
COMMON
FREE
1,000
 
ORIGINAL ISSUE
 
2142
3/8/2006
COMMON
FREE
250,000
 
ORIGINAL ISSUE
 
1059
2/27/2004
COMMON
FREE
16,000
 
ORIGINAL ISSUE
 
1061
3/19/2004
COMMON
FREE
216,000
 
ORIGINAL ISSUE
 
2138
11/17/2005
COMMON
FREE
30,000
 
REMOVE LEGEND 144
 
2135
11/9/2005
COMMON
FREE
60,000
 
REMOVE LEGEND 144
 
2003
4/1/2004
COMMON
FREE
11,000
 
ORIGINAL ISSUE
 
2025
5/4/2004
COMMON
FREE
500
 
ORIGINAL ISSUE
 
2005
4/8/2004
COMMON
FREE
3,500
 
ORIGINAL ISSUE
 
2058
6/3/2004
COMMON
RESTRICTED
1,000
 
RESTRICTED FEDERAL
 
2075
8/17/2004
COMMON
FREE
1,000
 
ORIGINAL ISSUE
 
2023
4/28/2004
COMMON
FREE
300
 
ORIGINAL ISSUE
 
2024
4/28/2004
COMMON
FREE
3,200
 
ORIGINAL ISSUE
 
2144
3/22/2006
COMMON
FREE
1,000,000
 
ORIGINAL ISSUE
 
2077
9/2/2004
COMMON
FREE
1,000
 
ORIGINAL ISSUE
 
2068
6/24/2004
COMMON
FREE
1,000
 
ORIGINAL ISSUE
 
2154
1/9/2007
COMMON
FREE
397,263
 
ORIGINAL ISSUE
 
2168
6/28/2007
COMMON
FREE
375,000
 
ORIGINAL ISSUE
 
1058
2/23/2004
COMMON
FREE
45,000
 
ORIGINAL ISSUE
 
2006
4/9/2004
COMMON
FREE
500
 
ORIGINAL ISSUE
 
2170
7/10/2007
COMMON
FREE
935,632
 
ORIGINAL ISSUE
 
2165
4/30/2007
COMMON
FREE
650,000
 
REMOVE LEGEND 144
 
2158
1/30/2007
COMMON
FREE
1,750,000
 
ORIGINAL ISSUE
 
2169
7/5/2007
COMMON
FREE
875,000
 
ORIGINAL ISSUE
 
2182
8/31/2007
COMMON
FREE
157,500
 
ORIGINAL ISSUE
 
2183
9/4/2007
COMMON
FREE
60,000
 
ORIGINAL ISSUE
 
2150
5/22/2006
COMMON
FREE
75,000
 
ORIGINAL ISSUE
 
2185
12/13/2007
COMMON
FREE
553,874
 
REMOVE LEGEND 144
 
2190
1/22/2008
COMMON
FREE
20,000
 
ORIGINAL ISSUE
 
2189
1/8/2008
COMMON
FREE
375,000
 
ORIGINAL ISSUE
 
2174
8/14/2007
COMMON
FREE
1,000,000
 
ORIGINAL ISSUE
       
Total Active:
8,865,269
   
THE CHRISTIE FAMILY TRUST
             
7260 SVC BOX
             
VICTORVILLE, CA 92392
             
 
2030
5/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
 
 
- 27 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
JAMES R. CHRIST
             
 
2101
12/13/2004
COMMON
RESTRICTED
43,750
 
RESTRICTED FEDERAL
 
2067
6/18/2004
COMMON
RESTRICTED
200,000
 
RESTRICTED FEDERAL
       
Total Active:
243,750
   
ROBERT K. CHRISTIE
             
22345 SHEFFIELD DR
             
MORENO VALLEY, CA 92557
             
 
2164
4/13/2007
COMMON
FREE
3,750,000
 
REMOVE LEGEND 144
 
2163
4/13/2007
COMMON
FREE
1,833,333
 
REMOVE LEGEND 144
       
Total Active:
5,583,333
   
CITIGROUP GLOBAL MKTS,INC.C/F DAVID
             
855 FRANKLIN AVE
             
GARDEN CITY, NY 11530
             
 
2127
10/27/2005
COMMON
RESTRICTED
923,122
 
RESTRICTED FEDERAL
       
Total Active:
923,122
   
BRET COVEY
             
 
2102
12/13/2004
COMMON
RESTRICTED
413,333
 
RESTRICTED FEDERAL
 
2181
8/31/2007
COMMON
RESTRICTED
800,000
 
REG-S
       
Total Active:
1,213,333
   
SCOTT COVEY
             
604 CALIFORNIA ST STE 1150
             
SAN FRANCISCO, CA 94108
             
 
2061
6/16/2004
COMMON
RESTRICTED
50,000
 
RESTRICTED FEDERAL
       
Total Active:
50,000
   
NORMAN C. DYER
             
20505 BROOK PARK DR
             
BROOKFIELD, WI 53045
             
 
2062
6/16/2004
COMMON
RESTRICTED
12,500
 
RESTRICTED FEDERAL
       
Total Active:
12,500
   
 
 
- 28 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
GERALD FOSTER
             
245 EAST 40TH ST APT 33B
             
NY, NY 10016
             
 
2107
12/13/2004
COMMON
RESTRICTED
72,000
 
RESTRICTED FEDERAL
       
Total Active:
72,000
   
FOUR BY FOUR CONSTRUCTION INC.
             
1055 TORREY PINES RD
             
STE 201
             
LA JOLLA, CA 92130
             
 
2071
7/2/2004
COMMON
RESTRICTED
35,000
 
RESTRICTED FEDERAL
       
Total Active:
35,000
   
WILLIAM F GREENE
             
3463 CAMINITO SIERRA R302
             
CARLSBAD, CA 92009
             
 
2146
4/5/2006
COMMON
RESTRICTED
150,000
 
RESTRICTED FEDERAL
 
2069
6/28/2004
COMMON
RESTRICTED
250,000
 
RESTRICTED FEDERAL
 
2151
8/28/2006
COMMON
RESTRICTED
150,000
 
RESTRICTED FEDERAL
       
Total Active:
550,000
   
GUERRILLA PARTNERS LP
             
C/O PETER SIRIS
             
237 PARK AVE 9TH FL
             
NY, NY 10017
             
 
2097
12/13/2004
COMMON
RESTRICTED
33,334
 
RESTRICTED FEDERAL
       
Total Active:
33,334
   
ALEXANDRA HAUGSTATTER
             
4 DAVIDSON DR
             
MANORVILLE, NY 11949
             
 
1013
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
JOHN J. HAUGSTATTER
             
4 DAVIDSON DR
             
MANORVILLE, NY 11949
             
 
1014
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
 
 
- 29 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
HAYDEN COMMUNICATIONS INC
             
1401 HAVENS DR
             
NORTH MYRTLE, SC 29582
             
 
2145
4/5/2006
COMMON
RESTRICTED
100,000
 
RESTRICTED FEDERAL
       
Total Active:
100,000
   
THIH HTWAR
             
4208 WASHINGTON WAY
             
SYKESVILLE, MD 21784
             
 
2018
4/20/2004
COMMON
RESTRICTED
5,000
 
RESTRICTED FEDERAL
       
Total Active:
5,000
   
YE LIN HTWAR
             
6109 EMERALD LANE
             
SYKESVILLE, MD 21784
             
 
2015
4/20/2004
COMMON
RESTRICTED
5,000
 
RESTRICTED FEDERAL
       
Total Active:
5,000
   
JEFF INGVALDSON
             
41 ST JOHN'S RD
             
CLIFTON BRISTOL, ENG BS82HD
             
 
1016
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
RACHEL INGVALDSON
             
41 ST JOHN'S RD
             
CLIFTON BRISTOL, ENG BS82HD
             
 
1017
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
IPOLIS COMMERCIAL LIMITED
             
PO BOX 6532
             
1211 GENEVA
             
 
2134
10/27/2005
COMMON
RESTRICTED
496,220
 
RESTRICTED FEDERAL
 
2038
5/12/2004
COMMON
RESTRICTED
66,665
 
RESTRICTED FEDERAL
 
2126
10/27/2005
COMMON
RESTRICTED
119,178
 
RESTRICTED FEDERAL
       
Total Active:
682,063
   
 
 
- 30 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
PAUL JANKA
             
34 E. 68TH STREET
             
#3A
             
NEW YORK, NY 10021
             
 
2160
2/14/2007
COMMON
FREE
633,074
 
REMOVE LEGEND 144
       
Total Active:
633,074
   
BOB JOHNSON
             
1508 3 RAY DR
             
PLACENTIA, CA 92870
             
 
2064
6/16/2004
COMMON
RESTRICTED
50,000
 
RESTRICTED FEDERAL
       
Total Active:
50,000
   
NORMAN KHAN
             
1510 SOUTH BASCOM AVE APT # 97
             
CAMPBELL, CA 95008
             
 
1018
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
THE VANGUARD GROUP FOR THE
             
2216 HAMPSHIRE DR
             
DISCOVERY BAY, CA 94514
             
 
2027
5/11/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
TERENCE F. LEONG
             
221 WARREN ST
             
HUDSON, NY 12534
             
 
2112
12/13/2004
COMMON
RESTRICTED
950,000
 
RESTRICTED FEDERAL
       
Total Active:
950,000
   
WILLIAM A. LEWIS IV
             
 
2042
5/12/2004
COMMON
RESTRICTED
70,000
 
RESTRICTED FEDERAL
       
Total Active:
70,000
   
 
 
- 31 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
STEFAN LOREN
             
10749 RED DAHLIA DR
             
WOODSTOCK, MD 21163
             
 
2091
11/12/2004
COMMON
RESTRICTED
6,250