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 2 nd 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.
 
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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 the Company”, “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;
 
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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;
 
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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.
 
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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.
 
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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”.
 
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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.
 
14

 
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

 
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, 14 th 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.
 
 
- 5 -

 

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.

 
- 6 -

 

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" )
 
 
- 7 -

 

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;
 
 
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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
 
 
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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, 14 th 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
 
RESTRICTED FEDERAL
 
2028
5/12/2004
COMMON
RESTRICTED
12,500
 
RESTRICTED FEDERAL
       
Total Active:
18,750
   
G. ROBERT MACDONALD, IRA ROLLOVER
             
87 SUNSET RD
             
WESTON, MA 02493
             
 
2017
4/20/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
E*TRADE CLEARING LLC FBO NICHOLAS
             
55 WATER ST 32 FL
             
NEW YORK, NY 10041
             
 
2152
9/19/2006
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
MARVIEW HOLDINGS INC.
             
201 S RIOS AVE
             
SOLANO BEACH, CA 92075
             
 
2081
11/12/2004
COMMON
RESTRICTED
25,000
 
RESTRICTED FEDERAL
 
2032
5/12/2004
COMMON
RESTRICTED
25,000
 
RESTRICTED FEDERAL
       
Total Active:
50,000
   
G ROBERT MCDONALD
             
17 DRUMLIN RD
             
ROCKPORT, MA 01966
             
 
2082
11/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
JUNE C. MCDONALD
             
17 DRUMLIN RD
             
ROCKPORT, MA 01966
             
 
2083
11/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
 
2056
5/26/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
20,000
   
 
 
- 32 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
MEADOWBROOK OPPORTUNITY FUND
             
520 LAKE COOK RD STE 690
             
DEERFIELD, IL 60069
             
 
2051
5/12/2004
COMMON
RESTRICTED
200,000
 
RESTRICTED FEDERAL
 
2099
12/13/2004
COMMON
RESTRICTED
100,000
 
RESTRICTED FEDERAL
       
Total Active:
300,000
   
TOM MONROE
             
6008 FIDLER AVE
             
LAKEWOOD, CA 90712
             
 
2065
6/16/2004
COMMON
RESTRICTED
100,000
 
RESTRICTED FEDERAL
       
Total Active:
100,000
   
GROVER G. & LINDA L. MOSS CO TTEE
             
 
2177
8/17/2007
COMMON
FREE
500,000
 
REMOVE LEGEND 144
 
2178
8/17/2007
COMMON
FREE
910,000
 
REMOVE LEGEND 144
       
Total Active:
1,410,000
   
KEN NAGATANI
             
200 SOUTH MADISON #11
             
PASADENA, CA 91101
             
 
1020
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
CITIGROUP CGM DAVID S NAGELBERG
             
PO BOX 9765
             
RANCHO SANTA FE, CA 92067
             
 
2092
11/12/2004
COMMON
RESTRICTED
50,000
 
RESTRICTED FEDERAL
 
2131
10/27/2005
COMMON
RESTRICTED
246,612
 
RESTRICTED FEDERAL
       
Total Active:
296,612
   
DAVID S. NAGELBERG 2003 REVOCABLE
             
PO BOX 2142
             
RANCHO SANTA FE, CA 92067
             
 
2043
5/12/2004
COMMON
RESTRICTED
100,000
 
RESTRICTED FEDERAL
       
Total Active:
100,000
   
 
 
- 33 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
JOHN D NARDONE
             
34 GENOA LANE
             
SHAVERTOWN, PA 18708
             
 
2116
1/6/2005
COMMON
RESTRICTED
75,000
 
RESTRICTED FEDERAL
       
Total Active:
75,000
   
RICHARD NESLUND
             
11370 LONGWATER CHASE
             
FORT MYERS, FL 33493
             
 
2130
10/27/2005
COMMON
RESTRICTED
600,009
 
RESTRICTED FEDERAL
 
2055
5/26/2004
COMMON
RESTRICTED
65,000
 
RESTRICTED FEDERAL
       
Total Active:
665,009
   
BURR NORTHROP
             
1181 VILLAGE DR
             
CHINO HILLS, CA 91709
             
 
2191
2/6/2008
COMMON
RESTRICTED
2,483,524
 
RESTRICTED FEDERAL
       
Total Active:
2,483,524
   
ODYSSEY TRANSPORTATION , INC
             
 
2054
5/26/2004
COMMON
RESTRICTED
37,500
 
RESTRICTED FEDERAL
       
Total Active:
37,500
   
JIMMY D. OMAN
             
8727 LONG BEACH BLVD
             
SO GATE, CA 90280
             
 
2084
11/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
 
2033
5/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
20,000
   
PAUL ORRSON
             
7920 SHERWOOD AVE
             
TOWSON, MD 21204
             
 
2093
11/12/2004
COMMON
RESTRICTED
37,500
 
RESTRICTED FEDERAL
       
Total Active:
37,500
   
 
 
- 34 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
GLEN OWENS
             
1836 BARKER WAY
             
PLACENTIA, CA 92870
             
 
2014
4/20/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
 
2085
11/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
20,000
   
DOUGLAS L. PARKER
             
 
2147
5/11/2006
COMMON
FREE
323,808
 
REMOVE LEGEND 144
 
2103
12/13/2004
COMMON
RESTRICTED
513,265
 
RESTRICTED FEDERAL
 
2148
5/11/2006
COMMON
RESTRICTED
916,192
 
RESTRICTED FEDERAL
       
Total Active:
1,753,265
   
LEWIS C. PELL
             
1 WEST 72 ND
             
NEW YORK, NY 10023
             
 
2129
10/27/2005
COMMON
RESTRICTED
600,029
 
RESTRICTED FEDERAL
       
Total Active:
600,029
   
THE LEWIS C PELL REVOCABLE TR U/A
             
1 WEST 72 ST APT 47
             
NEW YORK, NY 10023-3422
             
 
2070
7/2/2004
COMMON
RESTRICTED
65,000
 
RESTRICTED FEDERAL
       
Total Active:
65,000
   
RBSM ADVISORS LLC
             
1360 BEVERLY ROAD
             
SUITE103
             
MCLEAN, VA 22101
             
 
2188
12/27/2007
COMMON
RESTRICTED
45,500
 
RESTRICTED FEDERAL
       
Total Active:
45,500
   
NATIONAL INVESTOR SERVICES CORP
             
167 W MAIN ST, STE 1310
             
LEXINGTON, KY 40507
             
 
2052
5/14/2004
COMMON
RESTRICTED
30,000
 
RESTRICTED FEDERAL
       
Total Active:
30,000
   
 
 
- 35 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
NORMAN T. REYNOLDS
             
815 WALKER STE STE 1250
             
HOUSTON, TX 77002
             
 
2139
12/15/2005
COMMON
RESTRICTED
625,000
 
RESTRICTED FEDERAL
 
2140
12/15/2005
COMMON
RESTRICTED
225,000
 
RESTRICTED FEDERAL
       
Total Active:
850,000
   
JEFFREY E. ROBINSON
             
7500 SAN FELIPE 500
             
HOUSTON, TX 77063
             
 
2046
5/12/2004
COMMON
RESTRICTED
16,667
 
RESTRICTED FEDERAL
 
2094
11/12/2004
COMMON
RESTRICTED
8,334
 
RESTRICTED FEDERAL
       
Total Active:
25,001
   
STEVEN D ROSENTHAL
             
320 S. SECOND ST
             
RIO VISTA, CA 94571
             
 
2186
12/20/2007
COMMON
RESTRICTED
300,000
 
RESTRICTED FEDERAL
 
2172
8/6/2007
COMMON
RESTRICTED
1,200,000
 
REG-S
       
Total Active:
1,500,000
   
JEFFREY SALOMON
             
330 ORCHARD ST STE 205
             
NEW HAVEN, CT 06511
             
 
2066
6/16/2004
COMMON
RESTRICTED
20,000
 
RESTRICTED FEDERAL
 
2034
5/12/2004
COMMON
RESTRICTED
110,000
 
RESTRICTED FEDERAL
 
2086
11/12/2004
COMMON
RESTRICTED
130,000
 
RESTRICTED FEDERAL
       
Total Active:
260,000
   
EMIL J. SEDERSTROM
             
17121 WOODENEST DR NE
             
BOTHELL, WA 98011
             
 
2087
11/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
 
2035
5/12/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
20,000
   
 
 
- 36 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
PETER SIRIS
             
237 PARK AVE 9 FL
             
NEW YORK, NY 10017
             
 
2047
5/12/2004
COMMON
RESTRICTED
66,667
 
RESTRICTED FEDERAL
       
Total Active:
66,667
   
CHUCK SNYDER
             
 
2074
7/9/2004
COMMON
RESTRICTED
10,000
 
RESTRICTED FEDERAL
       
Total Active:
10,000
   
DONALD G. ST. CLAIR
             
 
2104
12/13/2004
COMMON
RESTRICTED
33,869
 
RESTRICTED FEDERAL
 
2026
5/10/2004
COMMON
RESTRICTED
40,000
 
RESTRICTED FEDERAL
       
Total Active:
73,869
   
BARBARA TAINTER
             
 
2105
12/13/2004
COMMON
RESTRICTED
47,500
 
RESTRICTED FEDERAL
 
1043
1/26/2004
COMMON
RESTRICTED
250,000
 
RESTRICTED FEDERAL
       
Total Active:
297,500
   
JEANETTE W. THOMPSON
             
1421 SW OSPREY COVE
             
PORT ST. LUCIE, FL 34986
             
 
1021
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
WRISTON A. THOMPSON
             
 
1022
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
 
 
- 37 -

 
 

SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
BYRON WALKER
             
PO BOX 11503
             
CARSON, CA 90749
             
 
2088
11/12/2004
COMMON
RESTRICTED
37,500
 
RESTRICTED FEDERAL
       
Total Active:
37,500
   
KAREN WEIL
             
17758 LITTEN DR
             
BOCA RATION, FL 33498
             
 
2132
10/27/2005
COMMON
RESTRICTED
153,708
 
RESTRICTED FEDERAL
       
Total Active:
153,708
   
RALPH & KAREN WEIL
             
17758 LITTEN DR
             
BOCA RATON, FL 33498
             
 
2048
5/12/2004
COMMON
RESTRICTED
16,667
 
RESTRICTED FEDERAL
       
Total Active:
16,667
   
RALPH WEIL
             
17758 LITTEN DR
             
BOCA RATON, FL 33498
             
 
2095
11/12/2004
COMMON
RESTRICTED
8,334
 
RESTRICTED FEDERAL
       
Total Active:
8,334
   
BERNARD WEISMAN
             
17061 WINDSOR PARK CT
             
BOCA RATON, FL 33496
             
 
1026
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
CAROL WEISMAN
             
 
1027
10/20/1998
COMMON
FREE
1,000
 
ORIGINAL ISSUE
       
Total Active:
1,000
   
 
 
- 38 -

 
 
SHAREHOLDER
CERT #
ISSUED
CLASS:
SERIES:
SHARES
 
RESTRICTIONS
               
BRIAN WHIPP
             
2082 US HWY 71
             
CLARINDA, IN 51632
             
 
2089
11/12/2004
COMMON
RESTRICTED
20,000
 
RESTRICTED FEDERAL
       
Total Active:
20,000
   
BRYAN L. WHIPP
             
701 S 8
             
CLARINDA, IA 51632
             
 
2036
5/12/2004
COMMON
RESTRICTED
20,000
 
RESTRICTED FEDERAL
       
Total Active:
20,000
   
WINDSTONE CAPITAL
             
C/O STEVEN GREEN
             
1725 LINEMAN ST
             
GLENVIEW, IL 60025
             
 
2184
9/17/2007
COMMON
FREE
189,000
 
REMOVE LEGEND 144
       
Total Active:
189,000
   
WILLIAM R WINN
             
4014 W. ROBINWOOD CT
             
VISALIA, CA 93291
             
 
2113
12/17/2004
COMMON
RESTRICTED
160,000
 
RESTRICTED FEDERAL
       
Total Active:
160,000
   
DAVID ZUSMAN
             
280 PARK AVE. SOUTH
             
#8B
             
NEW YORK, NY 10010
             
 
2162
2/14/2007
COMMON
FREE
212,592
 
REMOVE LEGEND 144
       
Total Active:
212,592
   
 
 
- 39 -

 
 
SHAREHOLDER
 
CERT #
ISSUED
CLASS:
SERIES:
SHARES
RESTRICTIONS
               
Preffered:
 
Certificates:
0
       
   
Shares:
0
     
Warrant:
 
Certificates:
0
       
   
Shares:
0
       
Options:
 
Certificates:
0
       
   
Shares:
0
     
Common Free Trading:
 
Certificates:
53
     
   
Shares:
17,533,778
     
Common Restricted:
 
Certificates:
88
Report Prepared by
   
   
Shares:
15,542,562
HOLLADAY STOCK TRANSFER, INC
   
       
2939 N 67th Place
   
Active Total:
 
Certificates:
141
Scottsdale, AZ 85251
   
       
tel [480] 481-3940 fax [480]
   
   
Shares:
33,076,340
481-3941
   
 
 
Post-February 6:
 
   
Cancelled:
 
   
100,000 additional shares cancelled in the name of Burr Northrup.
 
   
Issued:
 
   
Grover Moss
19,414,634
   
Joseph I. Emas
12,195,122
   
Walker Street Associates
12,195,122
   
Burr Northrop
10,500,000
   
Total:
87,281,218
 
 
 
- 40 -

 

Schedule 211

Year end
Entech
 
HB Covey
 
Env Tech
 
Fed
CA
FL
 
Fed
CA
 
Fed
CA
December 31, 2001
N/A
N/A
N/A
 
N/A
N/A
 
P
N/A
December 31, 2002
F
N/A
F
 
N/A
N/A
 
P
N/A
December 31, 2003
F
N/A
F
 
P
F
 
P
N/A
September 30, 2004
P
N/A
F
 
P
F
 
P
N/A
September 30, 2005
P
F
P
 
P
F
 
P
P
September 30, 2006
P
P
P
 
P
P
 
P
P
September 30, 2007
U
U
U
 
U
U
 
U
U
                   
F =  Filed
                 
P  = Prepared not filed
                 
N/A = not required
                 
U = not yet prepared
                 
 
 
 
- 41 -

 
 
Schedule 2.15
 
 
 
WARRANTS FOR FOX & COMPANY, INC. On January 23, 2004, the Company issued 475,375 five year warrants to purchase shares of common stock to Fox & Company, Inc., the broker who arranged the investment by Barron Partners LP. The exercise price is $1.10. The Warrants have "piggy-back" registration rights.
 
 
- 42 -

 
 
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

ENTECH ENVIRONMENTAL TECHNOLOGIES INC.

(Pursuant to Sections 607.0821 of the
Florida Business Corporation Act)
 

 
Entech Environmental Technologies Inc., a corporation organized and existing under the laws of the State of Florida (the “Corporation”), hereby certifies that, pursuant to authority vested in its Board of Directors by the Amended and Restated Articles of Incorporation of the Corporation, the following resolution was adopted as of February 20, 2008 by the Board of Directors of the Corporation pursuant to Section 607.0821 of the Florida Business Corporation Act and that shareholder action was not required:
 
RESOLVED, that, it is in the best interest of this Corporation to create a new series of its Preferred Stock; and be it
 
RESOLVED FURTHER, that, pursuant to authority vested in the Board of Directors of the Corporation by Article III of the Corporation's Amended and Restated Articles of Incorporation, of the total authorized number of 10,000,000 shares of Preferred Stock of the Corporation, there shall be designated a series of 1,000,000   shares of Preferred Stock which shall be issued in and constitute a single series to be known as “Series A Convertible Preferred Stock”, par value $0.001 per share (hereinafter called the “Series A Preferred”). The shares of Series A Preferred shall have the voting powers, designations, preferences and other special rights, and qualifications, limitations and restrictions thereof set forth below:
 
Section 1.  Dividends and Distributions .
 
(a)       The holders of Series A Preferred will not be entitled to dividends unless the Company pays cash dividends or dividends in other property to holders of outstanding shares of Common Stock, in which event, each outstanding share of the Series A Preferred will be entitled to receive dividends of cash or property, out of any assets legally available therefore, in an amount or value equal to the amount of dividends per share of Series A Preferred, as would have been payable on the number of shares of Common Stock into which each share of Series A Preferred would be convertible, if such shares of Series A Preferred had been converted to Common Stock as of the record date for the determination of holders of Common Stock entitled to receive such dividends (the
 
 
 

 
 
Post-Reverse Split Dividends ”); provided that if the Series A Preferred shall be entitled to receive dividends pursuant to the foregoing prior to the effectiveness of the Reverse Split, then each outstanding share of the Series A Preferred will be entitled to receive dividends of cash or property, out of any assets legally available therefor, in an amount or value equal to the product of Post-Reverse Split Dividends and the Reverse Split Ratio. Any dividend payable to the Series A Preferred will have the same record and payment date and terms as the dividend payable on the Common Stock. The rights of holders of Series A Preferred to receive dividends are subject to the rights of any holder of the Corporation’s Series B Convertible Preferred Stock, par value $0.001 per share (the “ Series B Preferred ”) or other senior stock.

(b)       The holders of Series A Preferred shall not be entitled to receive any dividends or other distributions except as provided in this Certificate of Designations, Preferences and Rights of Series A Preferred.

Section 2.  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, as a single class, upon all matters submitted to holders of Common Stock for a vote, with   each share of Series A Preferred carrying a number of votes equal to the number of shares of Common Stock issuable in a Mandatory Conversion (as defined in Section 4) based on the then applicable Conversion Rate, and each holder of Series A Preferred shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Company.

Section 3.   Redemption; Liquidation Preference . The Series A Preferred shall not be redeemable and shall have no liquidation preference.
 
Section 4.   Mandatory Conversion .
 
(a)       Automatic Conversion . The Company shall file an amendment to the Company’s Articles of Incorporation (“Amendment”) with the Secretary of State of the State of Florida effecting a 328.72898-for-1 reverse stock split of the Common Stock (or a split using such other ratio that may be required) (the “ Reverse Split Ratio ”) so that the Company has a number of authorized and unissued shares of Common Stock sufficient to permit the conversion of all outstanding shares of the Series A Preferred (the “ Reverse Split ”). As of the date of the filing and acceptance of the Amendment by the Secretary of State of the State of Florida, all the outstanding shares of Series A Preferred will immediately and automatically convert into shares of Common Stock without any notice or action required on the part of the Corporation or the holders of Series A Preferred or Common Stock (the “ Mandatory Conversion ”). In the Mandatory Conversion, each
 
 
- 2 -

 
 
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 ”).  
 
(b)       Obligation . The Company agrees that it shall, in good faith, (i) promptly take any and all such corporate action as may, in the opinion of its counsel, be necessary to effect the Reverse Split and to expeditiously effect the Mandatory Conversion and (ii) use its reasonable best efforts to obtain the requisite shareholder approval of any necessary amendment to the Articles of Incorporation to achieve the foregoing.
 
(c)       Conversion Procedure . The Company shall use its reasonable best efforts to issue or cause its transfer agent to issue the Common Stock issuable upon a Mandatory Conversion as soon as practicable, but in any event within five (5) business days after the Mandatory Conversion. In a Mandatory Conversion, all fractional shares will be rounded up to the nearest whole share. The Common Stock issuable upon the Mandatory Conversion shall be issued with a restrictive legend indicating that it was issued in a transaction which is exempt from registration under the Securities Act of 1933, as amended (“ Securities Act ”), and that it cannot be   transferred unless (i) it is registered under the Securities Act, (ii) an exemption from registration is available in the opinion of counsel to the Company or (iii) there is submitted to the Company such other evidence as may be satisfactory to the Company to the effect that any such transfer shall be in compliance with the Securities Act and applicable state securities law. The Common Stock issuable upon the Mandatory Conversion shall be issued in the name of the person who is the holder of the Series A Preferred unless, in the opinion of counsel to the Company, a change of name and such transfer can be made in compliance with applicable securities laws or there is submitted to the Company such other evidence as may be satisfactory to the Company that a change of name and such transfer can be made in compliance with applicable securities laws. The person in whose name the certificates of Series A Preferred are so recorded upon the Mandatory Conversion shall be treated as a common stockholder of the Company immediately following the filing and acceptance of the Amendment. Immediately following the filing and acceptance of the Amendment (and upon the occurrence of the Mandatory Conversion), and until such time as the Company shall tender to the record holder thereof a certificate representing the appropriate number of shares of Common Stock into which such holder’s Series A Preferred were converted in the Mandatory Conversion, each outstanding certificate representing Series A Preferred shall represent the number of shares of Common Stock into which such Series A Preferred shares were converted, which number shall reflect the effects of the Reverse Split.
 
Section 5.   Adjustments to Conversion Rate and Certain Other Adjustments . The Conversion Rate for the number of shares of Common Stock into which the Series A Preferred shall be converted on a Mandatory Conversion shall be subject to adjustment from time to time as hereinafter set forth, notice of which shall be promptly provided to the holders of the Series A Preferred:
 
(a)       Stock Dividends, Recapitalization, Reclassification, Split-Ups . If,
 
 
- 3 -

 
 
prior to or on the date of Mandatory Conversion, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or any right to acquire Common Stock or by a split-up, recapitalization or reclassification of shares of Common Stock or other similar event, then, on the effective date thereof, the Conversion Rate will be adjusted so that the number of shares of Common Stock issuable on the Mandatory Conversion of the Series A Preferred shall be increased in proportion to such increase in outstanding shares of Common Stock.  
 
(b)       Aggregation of Shares . If prior to or on the date of Mandatory Conversion, the number of outstanding shares of Common Stock is decreased by a consolidation, combination or reclassification of shares of Common Stock or other similar event, (including the Reverse Split), then, upon the effective date thereof, the number of shares of Common Stock issuable on the Mandatory Conversion of the Series A Preferred shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
 
(c)       Mergers or Consolidations . If at any time or from time to time prior to the date of a Mandatory Conversion there is a merger, consolidation or similar capital reorganization of the Common Stock (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for in Section 5(a) or 5(b) above) (each a “ Reorganization ”), as a part of such capital reorganization, provision shall be made so that the holders of the Series A Preferred shall thereafter be entitled to receive upon conversion of the Series A Preferred the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock issuable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, the resulting or surviving corporation (if not the Company) shall expressly assume the obligations to deliver, upon the exercise of the conversion privilege, such securities or property as the holders of Series A Preferred remaining outstanding, or other convertible preferred stock received by such holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provisions for the protection of the conversion right as provided above. If this Section 5(c) applies to a Reorganization, then Sections 5(a) and 5(b) shall not apply to such Reorganization.
 
(d)       Successive Changes. The provisions of this Section shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.
 
Section 6.   No Impairment . The Company will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as
 
 
- 4 -

 
 
may be necessary or appropriate in order to protect the conversion rights of the holders of Series A Preferred against impairment.
 
Section 7.   No Fractional Shares and Certificate as to Adjustments . No fractional shares shall be issued upon the conversion of any share or shares of the Series A Preferred, and the number of shares of Common Stock to be issued shall be rounded up to the nearest whole share. The number of shares issuable upon conversion shall be determined on the basis of the total number of shares of Series A Preferred the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.
 
Section 8.   Notices of Record Date . In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or any other right, the Company shall mail to each holder of Series A Preferred, at least ten (10) days prior to the record date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.
 
Section 9.   Notices . Any notice required by the provisions of this Certificate of Designations to be given to the holders of shares of Series A Preferred shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Company.
 
Section 10.   No Charge for Conversion . The issuance of certificates for shares of Common Stock upon the conversion of shares of Series A Preferred shall be made without charge to the converting holders for such certificates and without any tax in respect of the issuance of such certificates.
 
Section 11.   Return to Status as Authorized Shares . Upon a Mandatory Conversion or any other redemption or extinguishment of the Series A Preferred, the shares converted, redeemed or extinguished will be automatically returned to the status of authorized and unissued shares of preferred stock, available for future designation and issuance pursuant to the terms of the Articles of Incorporation. Following conversion of all outstanding shares of Series A Preferred on the Mandatory Conversion, this Certificate of Designations shall be automatically cancelled and void and be of no further force and effect.
 
Section 12.   Amendment .   This Certificate of Designations constitutes an agreement between the Company and the holders of the Series A Preferred. For as long as any shares of Series A Preferred are outstanding, the terms hereof may be amended, modified, repealed or waived only by the affirmative vote or written consent of holders of a majority of the then outstanding shares of Series A Preferred, voting together as a class and series.
 
 
- 5 -

 

IN WITNESS WHEREOF, the undersigned has executed and subscribed this Certificate and does affirm the foregoing as true this 20th day of February, 2008.
 
 
/s/: Terence Francis Leong

Name: Terence Francis Leong
Title: Chief Executive Officer
 
 
- 6 -

 
ENTECH ENVIRONMENTAL TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK


The undersigned, Terence Francis Leong does hereby certify that:
 
1.       He is the President and Chief Executive Officer of ENTECH ENVIRONMENTAL TECHNOLOGIES, INC. , a Florida corporation (the “ Company ”).
 
2.       The Company is authorized to issue 10,000,000 shares of Preferred Stock, par value $0.001 per share (“ Preferred Stock ”), none of which have been previously issued.
 
3.       The following resolutions were duly adopted by the Board of Directors of the Company (the “ Board of Directors ”):
 
WHEREAS, the Certificate of Incorporation of the Company provides for a class of its authorized stock known as Preferred Stock, comprised of 10,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;
 
WHEREAS, the 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, of any of them; and
 
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of up to seven million (7,000,000) shares of the Preferred Stock, which the Company has the authority to issue, as follows:
 
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:
 
TERMS OF PREFERRED STOCK  

Section 1 . Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Securities Purchase Agreement by and between the Company, Barron Partners LP, a Delaware limited partnership and EOS Holdings, LLC (the “Purchase Agreement”). For the purposes hereof, the following terms shall have the following meanings:

4.9% Limitation ” shall have the meaning set forth in the Purchase Agreement.
 
Bankruptcy Event ” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Subsidiary; (b) there is commenced against the Company or any Subsidiary any such case or proceeding that is not stayed or dismissed within 90 days after commencement; (c) the Company or any Subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 90 days; (e) the Company or any Subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any Subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any Subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
 
Board of Directors ” means the Board of the Directors of the Company.
 
Certificate ” means this Certificate of Designations, Preferences and Rights.
 
Commission ” means the Securities and Exchange Commission.

Common Stock ” means the Company’s common stock, par value $0.001 per share, and stock of any other class into which such shares may hereafter have been reclassified or changed.

Conversion Date ” shall have the meaning set forth in Section 6(a).
 
 
- 1 -

 

Conversion Ratio ” shall mean the number of shares of Common Stock issuable upon conversion of one share of Series B Preferred Stock. Each share of Series B Preferred Stock shall be initially convertible into 1 share of Common Stock, subject to adjustment as provided in this Certificate.

Conversion Price ” shall mean $1.20, subject to adjustment as provided in this Certificate.

Conversion Shares ” means, collectively, the shares of Common Stock into which the shares of Series B Preferred Stock are convertible in accordance with the terms hereof.

Conversion Shares Registration Statement ” means a registration statement that meets the requirements of the Registration Rights Agreement and registers the resale of the Conversion Shares by the Holder, who shall be named as a “selling stockholder” thereunder, all as provided in the Registration Rights Agreement.

Conversion Value ” means an amount determined by multiplying the number of Conversion Shares as to which a value is to be determined by the average of the closing prices of the Common Stock on the principal market or exchange on which the Common Stock is traded or quoted for the five days prior to the date as of which a Conversion Value is being determined.
 
Company ” means ENTECH ENVIRONMENTAL TECHNOLOGIES, INC. , a Florida corporation.
 
Effective Date ” means the date that the Conversion Shares Registration Statement is declared effective by the Commission.

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

Fundamental Transaction ” shall have the meaning set forth in Section 7(g)(iv) hereof.
 
Holder ” shall have the meaning given such term in Section 2 hereof.
 
Investors ” shall mean the persons named in Schedule A to the Purchase Agreement.
 
Person ” means a corporation, an association, a partnership, a limited liability company, a business association, an individual, a trust, a government or political subdivision thereof or a governmental agency.
 
Purchase Agreement ” means the Securities Purchase Agreement, relating to the issuance of the Company’s Series B Preferred Stock and Warrants for an aggregate purchase price of $3,400,000, as amended, modified or supplemented from time to time in accordance with its terms, a copy of which is on file at the principal offices of the Company.
 
Registration Rights Agreement ” means the Registration Rights Agreement, to which the Company and the original Holders are parties, as amended, modified or supplemented from time to time in accordance with its terms.
 
Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
Series B Preferred Stock ” shall have the meaning set forth in Section 2.
 
Subsidiary ” shall mean a corporation, limited liability company, partnership, joint venture or other business entity of which the Company owns beneficially or of record more than a majority of the equity interests.
 
Trading Day ” means a day on which the Common Stock is traded on a Trading Market.
 
Trading Market ” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board.
 
VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the [ VAP function ] ; (b) if the Common Stock is not then listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in good faith by persons holding a majority of the principal amount of Series B Preferred Stock then outstanding.
 
Rank of Series or Classes . For purposes of this Certificate, any stock of any series or class of the Company shall be deemed to rank:
 
 
- 2 -

 
 
(a) senior to the shares of Series B Preferred Stock, as to dividends or upon liquidation, dissolution or winding up, as the case may be, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of Series B Preferred Stock;
 
(b) on a parity with shares of Series B Preferred Stock, as to dividends or upon liquidation, dissolution or winding up, as the case may be, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of Series B Preferred Stock, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of Series B Preferred Stock;
 
(c) junior to shares of Series B Preferred Stock as to dividends or upon liquidation, dissolution or winding up, as the case may be, if such class shall be Common Stock or if the holders of shares of Series B Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of such class or classes.
 
Section 2 . Designation and Amount . The series of Preferred Stock, par value $0.001 per share shall be designated as the Company’s Series B Convertible Preferred Stock (the “ Series B Preferred Stock ”) and the number of shares so designated shall be seven million (7,000,000) (which shall not be subject to increase without the consent of all of the holders of 50% of the then outstanding shares of Series B Preferred Stock (each a “ Holder ” and collectively, the “ Holders ”). In the event of the conversion of shares of Series B Preferred Stock into Common Stock, pursuant to Section 6 hereof, or in the event that the Company shall otherwise acquire and cancel any shares of Series B Preferred Stock, the shares of Series B Preferred Stock so converted or otherwise acquired and canceled shall have the status of authorized but unissued shares of preferred stock, without designation as to series until such stock is once more designated as part of a particular series by the Board of Directors. In addition, if the Company shall not issue the maximum number of shares of Series B Preferred Stock, the Company may, from time to time, by resolution of the Board of Directors and the approval of the holders of a majority of the outstanding shares of Series B Preferred Stock, reduce the number of shares of Series B Preferred Stock authorized, provided, that no such reduction shall reduce the number of authorized shares to a number which is less than the number of shares of Series B Preferred Stock then issued or reserved for issuance. The number of shares by which the Series B Preferred Stock is reduced shall have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such stock is once more designated as part of a particular series by the Company’s Board of Directors. The Board of Directors shall cause to be filed with the Secretary of State of the State of Florida such certificate as shall be necessary to reflect any reduction in the number of shares constituting the Series B Preferred Stock.
 
Section 3 .   Dividends and Other Distributions . No dividends shall be payable with respect to the Series B Preferred Stock. No dividends shall be declared or payable with respect to the Common Stock while the Series B Preferred Stock is outstanding. Except as permitted under the Transaction Documents, the Company shall not redeem or purchase any shares of Common Stock or any other class or series of capital stock which is junior to or on a parity with the Series B Preferred Stock while the Series B Preferred Stock is outstanding.
 
Section 4 .   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, the Company shall not, 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 this Certificate, (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 (as defined in Section 5) 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 its 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. Notwithstanding any other provision of the Certificate; the provisions of Section 6(c) of this Certificate may not be amended or waived.
 
Section 5 . Liquidation . Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series B Preferred Stock an amount equal to one dollar and twenty cents ($1.20) per share of Series B Preferred Stock (the “ Liquidation Value ,” before any distribution or payment shall be made to the holders of any securities which are junior to the Series B Preferred Stock upon voluntary or involuntary liquidation, dissolution or winding up and after any distributions or payments made to holders of any class or series of securities which are senior to the Series B Preferred Stock upon voluntary or involuntary liquidation, dissolution or winding up. If the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. In the event the assets of the Company available for distribution to the holders of shares of Series B Preferred Stock upon dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this Section 5, no such distribution shall be made on account of any shares of any other class or series of capital stock of the Company ranking on a parity with the shares of Series B Preferred Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of Series B Preferred Stock, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. At the election of a Holder made by written notice delivered to the Company at least two (2) business days prior to the effective date of the subject transaction, as to the shares of Series B Preferred Stock held by such Holder, a Fundamental Transaction (excluding for purposes of this Section 5 any Fundamental Transaction described in Section 7(g)(iv)(A) or 7(g)(iv)(B)) or Change of Control shall be treated as a Liquidation as to such Holder.
 
 
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Section 6. Conversion .
 
a)       Reverse Split . Within 120 days from Closing the Company shall file an amendment to the Company’s Articles of Incorporation (the “ Amendment ”) with the Secretary of State of the State of Florida effecting a 328.72898-for-1 (the “ Reverse Split Ratio ”) reverse stock split of the issued and outstanding Common Stock (the “ Reverse Split ”) so that the number of authorized and unissued Common Stock shall be sufficient to permit the conversion of all outstanding shares of the Series B.
 
b)       Conversions at Option of Holder . Each share of Series B Preferred Stock shall be initially convertible (subject to the limitations set forth in Section 6(e)), into such number of shares of Common Stock based on the Conversion Ratio at the option of the Holders, at any time and from time to time on or after the Amendment is filed with the State of Florida effecting the Reverse Split. Holders shall effect conversions by providing the Company with the form of conversion notice attached hereto as Annex A (a “ Notice of Conversion ”) as fully and originally executed by the Holder, together with the delivery by the Holder to the Company of the stock certificate(s) representing the number of shares of Series B Preferred Stock to be converted, with such stock certificates being duly endorsed in full for transfer to the Company or with an applicable stock power duly executed by the Holder in the manner and form as deemed reasonable by the transfer agent of the Common Stock. Each Notice of Conversion shall specify the number of shares of Series B Preferred Stock to be converted, the number of shares of Series B Preferred Stock owned prior to the conversion at issue, the number of shares of Series B Preferred Stock owned subsequent to the conversion at issue, the stock certificate number and the shares of Series B Preferred Stock represented thereby which are accompanying the Notice of Conversion, and the date on which such conversion is to be effected, which date may not be prior to two Trading Days following the date the Holder mails such Notice of Conversion and the applicable stock certificates to the Company by overnight delivery service (the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the Trading Day immediately following the date that such Notice of Conversion and applicable stock certificates are received by the Company. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. Shares of Series B Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and may not be reissued.
 
c)       Adjustment of Conversion Ratio . If the Conversion Price is adjusted pursuant to Section 7 or as otherwise provided in this Certificate, the Conversion Ratio shall likewise be adjusted and the new Conversion Ratio shall 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. Thereafter, subject to any further adjustments in the Conversion Price, each share of Series B Preferred Stock shall be initially convertible into Common Stock based on the new Conversion Ratio.
 
d)       Automatic Conversion Upon Change of Control . Subject to Section 5, all of the outstanding shares of Series B Preferred Stock shall be automatically converted into the Conversion Shares upon the close of business on the business day immediately preceding the date fixed for consummation of any transaction resulting in a Change of Control of the Company (an “ Automatic Conversion Event ”). A “ Change in Control ” means a consolidation or merger of the Company with or into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company in a transaction or series of transactions. The Company shall not be obligated to issue certificates evidencing the Conversion Shares unless certificates evidencing the shares of Series B Preferred Stock so converted are either delivered to the Company or its transfer agent or the holder notifies the Company or its transfer agent in writing that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. Upon the conversion of the Series B Preferred Stock pursuant to this Section 6(d), the Company shall promptly send written notice thereof, by hand delivery or by overnight delivery, to the holders of record of all of the Series B Preferred Stock at their addresses then shown on the records of the Company, which notice shall state that certificates evidencing shares of Series B Preferred Stock must be surrendered at the office of the Company (or of its transfer agent for the Common Stock, if applicable).
 
e)       Beneficial Ownership Limitation . Except as provided in Section 6(d) of this Certificate, which shall apply as stated therein if an Automatic Conversion Event shall occur, the right of the Holder to convert the Series B Preferred Stock shall be subject to the 4.9% Limitation, with the result that Company shall not effect any conversion of the Series B Preferred Stock, and the Holder shall not have the 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), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.9% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion.  For the purposes of this Agreement beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act, and Regulation 13d-3 thereunder. For purposes of this Section 6(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the Company’s most recent quarterly reports (Form 10-Q or Form 10-QSB), Annual Reports (Form 10-K or Form 10-KSB), or definitive proxy statement or information statement as filed with the Commission under the Exchange Act, (B) a more recent public announcement by the Company, or (C) any other written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Series B Preferred Stock, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was publicly reported by the Company. This Section 6(e) may be waived or amended only with the consent of the Holders of all of the Series B Preferred Stock and the consent of the holders of a majority of the shares of outstanding Common Stock of the Company who are not Affiliates. For the purpose of the immediately preceding sentence, the term “Affiliate” shall mean any person: (a) that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with the Company, or (b) who beneficially owns (i) any shares of Series B Preferred Stock, or (ii) the Company’s Common Stock Purchase Warrant(s). For purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act..
 
f)       Mechanics of Conversion
 
1)       Delivery of Certificate Upon Conversion . Except as otherwise set forth herein, not later than three (3) Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Company shall deliver to the Holder (A) a certificate or certificates which, after the Effective Date, shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Series B Preferred Stock, and (B) if applicable, a bank check in the amount of accrued
 
 
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and unpaid dividends (if the Company has elected or is required to pay accrued dividends in cash). After the Effective Date, the Company shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Company or another established clearing Company performing similar functions if the Company’s transfer agent has the ability to deliver shares of Common Stock in such manner. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Series B Preferred Stock tendered for conversion.
 
2)       Obligation Absolute; Partial Liquidated Damages . The Company’s obligations to issue and deliver the Conversion Shares upon conversion of Series B Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares. In the event a Holder shall elect to convert any or all of its Series B Preferred Stock, the Company may not refuse conversion based on any claim that such Holder or any one associated or affiliated with the Holder of has been engaged in any violation of law, agreement or for any other reason (other than the inability of the Company to issue shares of Common Stock as a result of the limitation set forth in Section 6(e) hereof) unless an injunction from a court, on notice, restraining and or enjoining conversion of all or part of this Series B Preferred Stock shall have been sought and obtained and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the Conversion Value of Series B Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of an injunction precluding the same, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 6(f)(1) within two Trading Days of the Share Delivery Date applicable to such conversion, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Conversion Value of Series B Preferred Stock being converted, $50 per Trading Day for each Trading Day after the Share Delivery Date until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
 
3)       Compensation for “Buy-In on Failure to Timely Deliver Certificates Upon Conversion . If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 6(f)(1) by a Share Delivery Date, and if after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “ Buy-In ”), then the Company shall pay in cash to the Holder 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. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series B Preferred Stock with respect to which the aggregate sale price giving rise to such purchase obligation is $10,000, the Company shall be required to pay the Holder $1,000 hereunder. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the shares of Series B Preferred Stock as required pursuant to the terms hereof.
 
4)       Reservation of Shares Issuable Upon Conversion . Subject to Sections 4.3 and 6.1 of the Purchase Agreement, the Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Series B Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable upon the conversion of all outstanding shares of Series B Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.
 
5)       Fractional Shares . Upon a conversion of the Series B Preferred Stock, the Company shall not be required to issue stock certificates representing fractional shares of Common Stock. All fractional shares shall be carried forward and any fractional shares which remain after a Holder converts all of his or her Series B Preferred Stock shall be dropped and eliminated.
 
6)       Transfer Taxes . The issuance of certificates for shares of the Common Stock on conversion of the Series B Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Series B Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
 
7)       Absolute Obligation . Except as expressly provided herein, no provision of this Certificate shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the liquidated damages (if any) on, the shares of Series B Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
 
 
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Section 7 .   Certain Adjustments .
 
(a)       Stock Dividends and Stock Splits . If the Company, at any time subsequent to the Closing Date as long as the Series B Preferred Stock is outstanding: (i) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any Securities issued pursuant to the Transaction Documents), (ii) subdivide outstanding shares of Common Stock into a larger number of shares, (iii) combine (including by way of reverse stock split other than the Reverse Stock Split pursuant to Section 6(a) of this Agreement) outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
 
(b)       Subsequent Transactions . From the date hereof until such time as no Purchaser holds any of the Securities, the Company shall be prohibited from effecting or entering into an agreement to effect any transactions involving a “Variable Rate Transaction” or an “MFN Transaction” (each as defined below). The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) 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 the business of the Company or the market for the Common Stock. The term “MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to 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. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. Notwithstanding the foregoing, this Section 7(b) shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction or MFN Transaction shall be an Exempt Issuance.
 
 
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(c)       Subsequent Rights Offerings . The Company, at any time while the Series B Preferred Stock is outstanding, shall not issue 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 Conversion Price.
 
(d)       Price Adjustment Upon Issuance of Additional Common Stock . From and after the Closing Date and until such time as the Investors hold less than 20% of the Series B Preferred Stock, except for(i) Exempt Issuances which for the Purpose of this Section 7 (d) are not to exceed 5% of the outstanding shares of Common Stock for every two year period, (ii) issuances covered by Sections 7(a) and (iii) an issuance of Common Stock upon exercise or upon conversion of warrants, options or other convertible securities for which an adjustment has already been made pursuant to this Section 7 (“ Additional Shares of Common Stock ”) , as to all of which this Section 7(d) does not apply,   in the event the Company closes on the sale or issuance of Common Stock at a price, or issues 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 (such lower sales pricer, conversion or exercise price, as the case may be, being referred to as the “Lower Price", then and in such event, the Conversion Price shall be reduced, concurrently with such issue or sale, to the Lower Price.
 
(e)       Pro Rata Distributions . If the Company, at any time after the Closing, shall distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price shall be determined by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such 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. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
 
(f)       Calculations . All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its subsidiaries. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares and shares owned by subsidiaries, if any) actually issued and outstanding.
 
(g)       Notice to Holders.
 
(i)       Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any of this Section 7, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement).
 
(ii)       Notices of Other Events . If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock or any Fundamental Transaction, (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then in each such case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series B Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification or Fundamental Transaction; provided , that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
 
 
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(h)       Exempt Issuance . Notwithstanding the foregoing, no adjustment in the Conversion Price will be made in respect of an Exempt Issuance.
 
(i)       Fundamental Transaction . If, at any time while this Series B Preferred Stock is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects 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 (in any such case, a “ Fundamental Transaction ”), then upon any subsequent conversion of this Series B Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “ Alternate Consideration ”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series B Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall file a new Certificate with the same terms and conditions and issue to the Holder new preferred stock consistent with the foregoing provisions and evidencing the Holder’s right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (g) and insuring that this Series B Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding the foregoing or any other provisions of this Certificate, in the event that the agreement relating to a Fundamental Transaction provides for the conversion or exchange of the Series B Preferred Stock into equity or debt securities, cash or other consideration and the agreement is approved by the holders of a majority of the then-outstanding shares of Series B Preferred Stock, then the holders of the Series B Preferred Stock shall have only the rights set forth in such agreement.
 
Section 8 .   Miscellaneous .
 
(a)       Notices . Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed to the Company, at its principal address as reflected in its most recent filing with the Commission. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given when received, and any notice by telecopier shall be effective if confirmation of receipt is given by the party to whom the notice is transmitted.
 
(b)       Lost or Mutilated Preferred Stock Certificate . If a Holder’s Series B Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series B Preferred Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof, and indemnity, if requested, all reasonably satisfactory to the Company.
 
(c)       Next Business Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
 
(d)       Headings . The headings contained herein are for convenience only, do not constitute a part of this Certificate and shall not be deemed to limit or affect any of the provisions hereof.
 
(e)       Amendment . This Certificate may be amended with the consent of the holders of seventy-five percent (75%) of the outstanding shares of Series B Preferred Stock, except for Beneficial Ownership Limitation which is governed by Section 6 (e).
 
 
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RESOLVED, FURTHER , that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Company be and they hereby are authorized and directed to prepare and file a Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Florida law.
 
IN WITNESS WHEREOF, the undersigned has executed this Certificate this as of this February 20, 2008.
 
 
/s/: Terence Francis Leong
Name: Terence Francis Leong
Title: Chief Executive Officer
 
 
 
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ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES B PREFERRED STOCK)

The undersigned hereby elects to convert the number of shares of Series B Convertible Preferred Stock indicated below, into shares of common stock, par value $0.001 per share (the “ Common Stock ”), of ENTECH ENVIRONMENTAL TECHNOLOGIES, INC. a Florida corporation (the “ Company ”), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
 
Date to Effect Conversion: ________________________________________
 
Number of shares of Common Stock owned prior to Conversion: _______________
 
Number of shares of Series B Preferred Stock to be Converted: ________________
 
Value of shares of Series B Preferred Stock to be Converted: ____________________
 
Number of shares of Common Stock to be Issued: ___________________________
 
Certificate Number of Series B Preferred Stock attached hereto:_________________
 
Number of Shares of Series B Preferred Stock represented by attached certificate:_________
 
Number of shares of Series B Preferred Stock subsequent to Conversion: ________________
 
 
[HOLDER]
 
 
By:

Name:
Title:
 
 
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