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Exhibit 10.2
SHARE EXCHANGE AGREEMENT
THIS SHARE
EXCHANGE AGREEMENT (the "Exchange Agreement") is made as of
October 1, 2009 (the "Effective Date") by and between Ji Ho Cho
("Cho"),
Seok Kwon Hong ("Hong") and Franklin Wireless Corporation, a Nevada
corporation
("Franklin"). Cho and Hong are also sometimes collectively or
severally as the
context may indicates referred to as the "Major Shareholders"). The
Major
Shareholders are controlling shareholders of Diffon Corporation, a
South Korean
corporation (the "Company"').
RECITALS
A. Diffon and Franklin are parties to that certain Common Stock
Purchase
Agreement ("the "Purchase Agreement").
B. The execution and performance by the Major Shareholders of their
obligations
under this Exchange Agreement is a condition to the obligations of
Franklin
under the Purchase Agreement.
C. All terms not specifically defined in this Exchange Agreement
shall have the
respective meanings set forth in the Purchase Agreement.
In consideration of the mutual covenants and agreements contained
herein,
including the consideration exchanged between the parties, the
receipt and
sufficiency of which is hereby acknowledged, each of the parties
agrees as
follows:
1. Exchange and
Issuance of Common Stock
1.1. Exchange of Common Stock. Subject to the terms and
conditions of this Agreement, each Major Shareholder agrees to
exchange and
transfer at the Closing the shares of Common Stock of the Company
("Diffon
Common Stock") held by them and identified in Exhibit A hereto for
shares of
Franklin restricted common stock ("Franklin Common Stock") as set
forth on
attached Exhibit A. At the Closing, each Major Shareholder shall
transfer and
deliver to Franklin their respective certificates of Diffon Common
Stock as
identified in Exhibit A, duly endorsed for transfer, and Franklin
shall deliver
to each the Major Shareholders a certificate representing the
Franklin Common
Stock as identified in Exhibit A.
2. Representations
and Warranties.
2.1. Representations of the Major Shareholders. The Major
Shareholders, for the benefit of Franklin jointly and severally
warrant,
represent, covenant and agree as follows:
(a) The Diffon Common Stock is being transferred to
Franklin, free and clear of all liens, encumbrances, security
interests,
options, equities and restrictions on transfer. Each Major
Shareholder has the
full legal power and authority to transfer and deliver the Diffon
Common Stock
transferred by him pursuant to this Exchange Agreement without the
necessity of
obtaining the consent of any person or entity. Franklin will
receive good, valid
and absolute title of the Diffon Common Stock, free from any
liens,
encumbrances, security interests, options, equities, and
restrictions on
transfer except as provided herein. There are no voting trusts,
proxies, or
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other agreements or understandings with respect to the voting of
the Diffon
Common Stock. There are no options or other understandings by which
the Company,
the Major Shareholders or any third party may receive an interest
to the Diffon
Common Stock. The Diffon Common Stock represents [20.12%] of the
outstanding
capital stock of the Company.
(b) Neither the execution and delivery of this
Exchange Agreement nor the consummation of the transactions
contemplated hereby,
nor compliance by the Major Shareholders with any of the provisions
hereof,
will:
(i) violate, conflict with, result in a
breach of any provisions of, constitute a default under, or result
in the
termination of, accelerate the performance required by or result in
the creation
of any lien, charge or encumbrance upon any of the shares of Diffon
Common Stock
under any of the terms or conditions of any note, bond, mortgage,
indenture,
deed of trust, shareholders' agreement, license, agreement, trust,
lease or
other instrument or obligation to which either Major Shareholder or
the Company,
or by which they, the Company or any of their properties or assets
may be bound
or affected; or
(ii) violate any order, writ, injunction,
decree, or any statute, rule or regulation, applicable to either
Major
Shareholder or the Company or any of their properties or
assets.
(c) The Major Shareholders have the authority to
enter into and perform their respective obligations hereunder
without the
consent or approval of any person or entity. This Exchange
Agreement constitutes
the valid and legally binding obligation of each Major Shareholder
and is
enforceable in accordance with its terms.
(d) There is no action, suit, proceeding or to the
knowledge of the Major Shareholders, investigation pending or
currently
threatened against the Major Shareholders that questions the
validity of this
Exchange Agreement, or the right of the Major Shareholders to enter
into the
Exchange Agreement, or to consummate the transactions contemplated
hereby, nor
is there is any basis for the foregoing.
(e) There is no suit, existing judgment, action or
legal, administrative, arbitration or other proceeding pending
against or
affecting the Diffon Common Stock in any court or before any
governmental agency
or authority. Neither Major Shareholder nor the Company is in
default with
respect to any order, writ, injunction or decree of any federal,
state, county,
local or foreign court, department, agency, or instrumentality.
(f) The Major Shareholders have disclosed all
material facts respecting the Company and the Diffon Common Stock.
No
representation, warranty or other statement made by the Major
Shareholders
herein or in any certificate or written statement furnished to
Franklin contains
any untrue statement of a material fact or omits to state a
material fact
necessary in order to make the statements contained herein and
therein, in light
of the circumstances under which they were made, not
misleading.
(g) The Major Shareholders have reviewed the
representations and warranties of the Company set forth in the
Purchase
Agreement and reaffirm, adopt and independently make all of the
representations
and warranties of the Company set forth in the Purchase Agreement
as though set
forth in full herein.
2
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(h) As to the Franklin Common Stock, each Major
Shareholder is acquiring the Franklin Common Stock for his own
account and not
with a view to distribution within the meaning of Section 2(11) of
the US
Securities Act of 1933, as amended (the "Securities Act"). Each
Major
Shareholder is an "accredited investor" as such term is defined in
Rule 501(a)
under the Securities Act.
(i) The Major Shareholders understand and acknowledge
that all information, documents and records requested by them
pertaining to an
investment in the Franklin Common Stock have been made available to
the Major
Shareholders who have had a reasonable opportunity to ask questions
of and
receive answers from Franklin, and all such questions have been
answered to the
full satisfaction of the Major Shareholders.
(j)
The Major Shareholders acknowledge and understand
that the shares of Franklin Common Stock have not been registered
or qualified
under the Securities Act, or qualified under the securities laws of
any state in
reliance on exemptions from registration and qualification for
non-public
offerings. Franklin is relying upon the "safe harbor" provided by
Regulation S
promulgated under the Securities Act by the U.S. Securities and
Exchange
Commission ("SEC") for offers and sales of securities occurring
outside the
United States ("Regulation S") and/or on Section 4(2) under the
Securities Act;
(iii) that it is a condition to the availability of the Regulation
S safe harbor
that the Franklin Common Stock not be offered or sold in the United
States or to
a U.S. Person until the expiration of a period of one year
following the
Closing; (iv) that, notwithstanding the foregoing, prior to the
expiration of
one year after the Closing (the "Restricted Period"), the Stock may
be offered
and sold by the holder thereof only if such offer and sale is made
in compliance
with the terms of this Exchange Agreement and either: (A) if the
offer or sale
is within the United States or to or for the account of a U.S.
Person (as such
terms are defined in Regulation S), the securities are offered and
sold pursuant
to an effective registration statement or pursuant to Rule 144
under the
Securities Act; or (B) the offer and sale is outside the United
States and to
other than a U.S. Person. The foregoing restrictions are binding
upon subsequent
transferees of the Franklin Common Stock, except for transferees
pursuant to an
effective registration statement. The Major Shareholders understand
that the
shares of Franklin Common Stock may not be sold and must be held
indefinitely
unless (a) they are subsequently registered under the Securities
Act and
qualified under any applicable state securities laws, or (b)
Franklin receives
the written opinion
