EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") has been made as
of December 10, 2006, by and among Diversifax, Inc., a Delaware corporation
("DSFX"), DFAX Acquisition Vehicle, Inc., a Delaware corporation and a
wholly-owned Subsidiary of DSFX ("SUB"), Upper Class Group Limited, a British
Virgin Islands corporation ("UCG"), and the shareholders of UCG, each of whom is
identified on Schedule A to this Agreement (the "UCG SHAREHOLDERS").
WHEREAS, the respective Boards of Directors of DSFX, Sub and UCG have
approved the merger, pursuant and subject to the terms and conditions of this
Agreement, of Sub with and into UCG (the "MERGER"), whereby all of the issued
and outstanding shares of the Common Stock of UCG (the "UCG COMMON STOCK") will
be converted into the right to receive a specified number of shares of the
Common Stock of DSFX (the "DSFX COMMON STOCK"); and the parties each desire to
make certain representations, warranties and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, the parties agree to
effect the Merger on the terms and conditions herein provided and further agree
as follows:
ARTICLE 1. DEFINITIONS
1.1 DEFINITIONS.
In addition to the other definitions contained in this Agreement, the
following terms will, when used in this Agreement, have the following respective
meanings:
"AFFILIATE" means a Person that, directly or indirectly, controls, is
controlled by, or is under common control with, the referenced party.
"CLAIM" means any contest, claim, demand, assessment, action, suit,
cause of action, complaint, litigation, proceeding, hearing, arbitration,
investigation or notice of any of the foregoing involving any Person.
"CLOSING" means the consummation of the Merger.
"CODE" means the Internal Revenue Code of 1986, as amended, together
with all rules and regulations promulgated thereunder.
"CONSTITUENT CORPORATIONS" means UCG and Sub, as the constituent
corporations of the Merger.
"GAAP" means United States generally accepted accounting practices.
"GCL" means the Delaware General Corporation Law.
"PERSON" means and includes any individual, partnership, corporation,
trust, company, unincorporated organization, joint venture or other entity, and
any Governmental Entity.
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"RECORD HOLDER" means a holder of record of UCG Common Stock as shown
on the regularly maintained stock transfer records of UCG.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other entity of which such Person, directly
or indirectly through an Affiliate, owns an amount of voting securities, or
possesses other ownership interests, having the power, direct or indirect, to
elect a majority of the Board of Directors or other governing body thereof.
"SURVIVING CORPORATION" means UCG, as the surviving corporation of the
Merger.
"U.S." means the United States of America.
1.2 INTERPRETATION.
In this Agreement, unless the express context otherwise requires:
(a) the words "HEREIN," "HEREOF" and "HEREUNDER and words of similar
import refer to this Agreement as a whole and not to any particular provision of
this Agreement;
(b) references to "ARTICLE" or "SECTION" are to the respective Articles
and Sections of this Agreement, and references to "EXHIBIT" or "SCHEDULE" are to
the respective Exhibits and Schedules annexed hereto;
(c) references to a "PARTY" means a party to this Agreement and include
references to such party's successors and permitted assigns;
(d) references to a "THIRD PARTY" means a Person that is neither a
Party to this Agreement nor an Affiliate thereof;
(e) the terms "DOLLARS" and "$" means U.S. dollars;
(f) terms defined in the singular have a comparable meaning when used
in the plural, and vice versa;
(g) the masculine pronoun includes the feminine and the neuter, and
vice versa, as appropriate in the context; and
(h) wherever the word "INCLUDE," "INCLUDES" or "INCLUDING is used in
this Agreement, it will be deemed to be followed by the words "without
limitation."
ARTICLE 2. THE MERGER
2.1 Effective Time of the Merger
Subject to the provisions of this Agreement, the Merger will be
consummated by the filing with the Secretary of State of the State of Delaware
and the appropriate corporation office in the British Virgin Islands ("BVI") of
articles of merger, in such form as required by, and signed and attested in
accordance with, the relevant provisions of the GCL and the corporate law of the
BVI, as the case may be (the time of such filing or such later time and date as
is specified in such filing being the "EFFECTIVE TIME").
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2.2 CLOSING.
The Closing will take place at 10:00 a.m., local time, on the earliest
date practicable after all of the conditions set forth in Articles 7 and 8 are
satisfied or waived by the appropriate party (the "CLOSING DATE").
2.3 EFFECTS OF THE MERGER.
By virtue of the Merger and without the necessity of any action by or
on behalf of the Constituent Corporations, or either of them:
(a) at the Effective Time, (i) the separate existence of Sub will
cease, and Sub will be merged with and into UCG, and (ii) the certificate of
incorporation and bylaws of UCG as in effect immediately prior to the Effective
Time will be the certificate of incorporation and bylaws of the Surviving
Corporation until thereafter amended; and
(b) at and after the Effective Time, the Surviving Corporation will
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well for stock subscriptions as all other things in
action or belonging to each of the Constituent Corporations will be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest will be thereafter as effectually
be the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, will not revert or be in
any way impaired; but all rights of creditors and all liens upon any property of
either of the Constituent Corporations will be preserved unimpaired, and all
debts, liabilities and duties of the respective Constituent Corporations will
thereafter attach to the Surviving Corporation, and may be enforced against it
to the same extent as if such debts and liabilities had been incurred or
contracted by it.
ARTICLE 3. EFFECT OF MERGER ON CAPITAL STOCK
3.1 EFFECT ON CAPITAL STOCK.
As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder of shares of UCG Common Stock or of shares of
the capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub will be converted into the right to receive one fully paid
and non-assessable share of the capital stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK. Shares of UCG Common Stock, if any,
that are held by UCG as treasury stock will be cancelled and retired and will
cease to exist, and no Merger Consideration will be delivered in exchange
therefor. Shares of DSFX Common Stock, if any, owned by UCG as of the Effective
Time will remain unaffected by the Merger.
(c) EXCHANGED SHARES; STOCK MERGER CONSIDERATION.
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(i) "EXCHANGED SHARES" means all shares of UCG Common Stock
issued and outstanding immediately prior to the Effective Time other
than shares of UCG Common Stock, if any, held by UCG as treasury stock.
(ii) The consideration payable in the Merger will consist of
an aggregate of twenty six million five hundred thousand (26,500,000)
shares of DSFX Common Stock, which shall be distributed among the UCG
Shareholders in accordance with Schedule A hereto (the "STOCK MERGER
CONSIDERATION").
(d) EXCHANGE OF EXCHANGED SHARES FOR STOCK MERGER CONSIDERATION. As of
the Effective Time, by virtue of the Merger, each issued and outstanding
Exchanged Share will be converted into the right to receive the Stock Merger
Consideration, payable, to the Record Holders of Exchanged Shares at the
Effective Time. As of the Effective Time, all shares of UCG Common Stock will no
longer be outstanding and will automatically be cancelled and retired and will
cease to exist, and each holder of a certificate representing any such shares
will cease to have any rights with respect thereto, except the right to receive
the Stock Merger Consideration therefor, without interest, upon the surrender of
such certificate in accordance with Section 3.2.
3.2 EXCHANGE OF STOCK MERGER CONSIDERATION FOR EXCHANGED SHARES.
(a) EXCHANGE. On the Closing Date, the holders of all of the UCG Common
Stock shall deliver to DSFX certificates or other documents evidencing all of
the issued and outstanding UCG Common Stock, duly endorsed in blank or with
executed power attached thereto in transferable form. In exchange for all of the
UCG Common Stock tendered pursuant hereto, DSFX shall issue to UCG Shareholders
the Stock Merger Consideration.
(b) NO FURTHER OWNERSHIP RIGHTS IN UCG COMMON STOCK. All shares of DSFX
Common Stock issued upon the surrender for exchange of shares of UCG Common
Stock in accordance with the terms hereof will be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of UCG Common Stock,
and there will be no further registration of transfers of the shares of UCG
Common Stock (other than shares held directly or indirectly by DSFX) after the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or its transfer agent for any reason, such Certificates
will be cancelled and exchanged as provided by this Article 3.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UCG
UCG represents and warrants to DSFX and to Sub as follows, as of the
date hereof and as of the Closing Date:
4.1 ORGANIZATION.
UCG is a corporation duly organized, validly existing and in good
standing under the laws of British Virgin Island and has the corporate power and
is duly authorized, qualified, franchised and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
entity in the country or states in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification. Included in the attached Schedules (as hereinafter defined) are
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complete and correct copies of the articles of incorporation, bylaws and
amendments thereto as in effect on the date hereof. The execution and delivery
of this Agreement does not and the consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof will not, violate any
provision of UCG's certificate of incorporation or bylaws. UCG has full power,
authority and legal right and has taken all action required by law, its articles
of incorporation, bylaws or otherwise to authorize the execution and delivery of
this Agreement.
4.2 CAPITALIZATION.
The authorized capitalization of UCG consists of 50,000 shares of
common stock, no par value and no preferred shares. As of the date hereof, there
are 50,000 shares of common stock issued and outstanding. All issued and
outstanding common shares have been legally issued, fully paid, are
nonassessable and not issued in violation of the preemptive rights of any other
person. UCG has no other securities, warrants or options authorized or issued.
4.3 SUBSIDIARIES.
UCG owns 100% of Shouguang City Haoyuan Chemical Company Limited, a
corporation organized under the laws of China.
4.4 TAX MATTERS; BOOKS & RECORDS
(a) The books and records, financial and others, of UCG are in all
material respects complete and correct and have been maintained in accordance
with good business accounting practices; and
(b) UCG has no liabilities with respect to the payment of any country,
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties).
(c) UCG shall remain responsible for all debts incurred prior to the
closing.
4.5 INFORMATION.
The information concerning UCG as set forth in this Agreement and in
the attached Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.6 TITLE AND RELATED MATTERS.
UCG has good and marketable title to and is the sole and exclusive
owner of all of its properties, inventory, interests in properties and assets,
real and personal (collectively, the "Assets") free and clear of all liens,
pledges, charges or encumbrances. Except as set forth in the Schedules attached
hereto, UCG owns free and clear of any liens, claims, encumbrances, royalty
interests or other restrictions or limitations of any nature whatsoever and all
procedures, techniques, marketing plans, business plans, methods of management
or other information utilized in connection with UCG's business. Except as set
forth in the attached Schedules, no third party has any right to, and UCG has
not received any notice of infringement of or conflict with asserted rights of
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others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a materially adverse affect on the business,
operations, financial conditions or income of UCG or any material portion of its
properties, assets or rights.
4.7 LITIGATION AND PROCEEDINGS
There are no actions, suits or proceedings pending or threatened by or
against or affecting UCG, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or before any
arbitrator of any kind that would have a material adverse effect on the
business, operations, financial condition, income or business prospects of UCG.
UCG does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality.
4.8 CONTRACTS.
On the Closing Date, except as set forth on Schedule 4.8:
(a) there are no material contracts, agreements, franchises, license
agreements, or other commitments to which UCG is a party or by which it or any
of its properties are bound;
(b) UCG is not a party to any contract, agreement, commitment or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award which materially and
adversely affects, or in the future may (as far as UCG can now foresee)
materially and adversely affect, the business, operations, properties, assets or
conditions of UCG; and
(c) UCG is not a party to any material oral or written: (i) contract
for the employment of any officer or employee; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension, benefit or
retirement plan, agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv) guaranty of any obligation
for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations, which, in the aggregate exceeds
$1,000; (v) consulting or other contract with an unexpired term of more than one
year or providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; or (vii) contract, agreement, or other
commitment involving payments by it for more than $10,000 in the aggregate.
4.9 NO CONFLICT WITH OTHER INSTRUMENTS.
The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of, or constitute an event of default under, any material
indenture, mortgage, deed of trust or other material contract, agreement or
instrument to which UCG is a party or to which any of its properties or
operations are subject.
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4.10 MATERIAL CONTRACT DEFAULTS.
To the best of UCG's knowledge and belief, it is not in default in any
material respect under the terms of any outstanding contract, agreement, lease
or other commitment which is material to the business, operations, properties,
assets or condition of UCG, and there is no event of default in any material
respect under any such contract, agreement, lease or other commitment in respect
of which UCG has not taken adequate steps to prevent such a default from
occurring.
4.11 GOVERNMENTAL AUTHORIZATIONS.
To the best of UCG's knowledge, UCG has all licenses, franchises,
permits and other governmental authorizations that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, no authorization, approval, consent or order of,
or registration, declaration or filing with, any court or other governmental
body is required in connection with the execution and delivery by UCG of the
transactions contemplated hereby.
4.12 COMPLIANCE WITH LAWS AND REGULATIONS.
To the best of UCG's knowledge and belief, UCG has complied with all
applicable statutes and regulations of any federal, state or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets or
condition of UCG or would not result in UCG's incurring any material liability.
4.13 INSURANCE.
All of the insurable properties of UCG are insured for UCG's benefit
under valid and enforceable policy or policies containing substantially
equivalent coverage and will be outstanding and in full force at the Closing
Date.
4.14 APPROVAL OF AGREEMENT.
The directors of UCG have authorized the execution and delivery of the
Agreement and have approved the transactions contemplated hereby.
4.15 MATERIAL TRANSACTIONS OR AFFILIATIONS.
As of the Closing Date, there will exist no material contract,
agreement or arrangement between UCG and any person who was at the time of such
contract, agreement or arrangement an officer, director or person owning of
record, or known by UCG to own beneficially, ten percent (10%) or more of the
issued and outstanding Common Shares of UCG and which is to be performed in
whole or in part after the date hereof. UCG has no commitment, whether written
or oral, to lend any funds to, borrow any money from or enter into any other
material transactions with, any such affiliated person.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF DSFX
DSFX represents and warrants to UCG, as of the date hereof and as of
the Closing Date, as follows:
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5.1 ORGANIZATION.
DSFX is a corporation duly organized, validly existing, and in good
standing under the laws of Delaware and has the corporate power and is duly
authorized, qualified, franchised and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
corporation in the jurisdiction in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification. The execution and delivery of this Agreement does not and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not violate any provision of DSFX's articles of
incorporation or bylaws. DSFX has full power, authority and legal right and has
taken all action required by law, its articles of incorporation, its bylaws or
otherwise to authorize the execution and delivery of this Agreement.
5.2 CAPITALIZATION.
The authorized capitalization of DSFX consists of 70,000,000 shares of
common stock, $0.001 par value per share. As of the date hereof, DSFX has
approximately 517,262 shares of common stock outstanding. All issued and
outstanding shares are legally issued, fully paid and nonassessable and are not
issued in violation of the preemptive or other rights of any person.
5.3 SUBSIDIARIES.
DSFX has no subsidiaries other than Sub.
5.4 TAX MATTERS: BOOKS AND RECORDS.
(a) The books and records, financial and others, of DSFX are in all
material respects complete and correct and have been maintained in accordance
with good business accounting practices; and
(b) DSFX has no liabilities with respect to the payment of any country,
federal, state, county, or local taxes (including any deficiencies, interest or
penalties).
(c) DSFX shall remain responsible for all debts incurred by DSFX prior
to the date of closing.
5.5 LITIGATION AND PROCEEDINGS.
There are no actions, suits, proceedings or investigations pending or
threatened by or against or affecting DSFX or its properties, at law or in
equity, before any court or other governmental agency or instrumentality,
domestic or foreign or before any arbitrator of any kind that would have a
material adverse affect on the business, operations, financial condition or
income of DSFX DSFX is not in default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.
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5.6 MATERIAL CONTRACT DEFAULTS.
DSFX is not in default in any material respect under the terms of any
outstanding contract, agreement, lease or other commitment which is material to
the business, operations, properties, assets or condition of DSFX, and there is
no event of default in any material respect under any such contract, agreement,
lease or other commitment in respect of which DSFX has not taken adequate steps
to prevent such a default from occurring.
5.7 INFORMATION.
The information concerning DSFX as set forth in this Agreement and in
the attached Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made in light of the circumstances
under which they were made, not misleading.
5.8 TITLE AND RELATED MATTERS.
DSFX has good and marketable title to and is the sole and exclusive
owner of all of its properties, inventory, interest in properties and assets,
real and personal (collectively, the "Assets") free and clear of all liens,
pledges, charges or encumbrances. DSFX owns free and clear of any liens, claims,
encumbrances, royalty interests or other restrictions or limitations of any
nature whatsoever and all procedures, techniques, marketing plans, business
plans, methods of management or other information utilized in connection with
DSFX's business. No third party has any right to, and DSFX has not received any
notice of infringement of or conflict with asserted rights of other with respect
to any product, technology, data, trade secrets, know-how, proprietary
techniques, trademarks, service marks, trade names or copyrights which, singly
on in the aggregate, if the subject of an unfavorable decision ruling or
finding, would have a materially adverse affect on the business, operations,
financial conditions or income of DSFX or any material portion of its
properties, assets or rights.
5.9 CONTRACTS.
On the Closing Date:
(a) There are no material contracts, agreements franchises, license
agreements, or other commitments to which DSFX is a party or by which it or any
of its properties are bound;
(b) DSFX is not a party to any contract, agreement, commitment or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award materially and adversely
affects, or in the future may (as far as DSFX can now foresee) materially and
adversely affect, the business, operations, properties, assets or conditions of
DSFX; and
(c) DSFX is not a party to any material oral or written: (i) contract
for the employment of any officer or employee; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv) guaranty of any obligation
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for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties, of obligations, which, in the aggregate exceeds
$1,000; (v) consulting or other contract with an unexpired term of more than one
year or providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; (vii) contract, agreement or other commitment
involving payments by it for more than $10,000 in the aggregate.
5.10 COMPLIANCE WITH LAWS AND REGULATIONS.
To the best of DSFX's knowledge and belief, DSFX has complied with all
applicable statutes and regulations of any federal, state or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets or
condition of DSFX or would not result in DSFX incurring material liability.
5.11 INSURANCE.
DSFX maintains no insurance policies.
5.12 APPROVAL OF AGREEMENT.
The directors of DSFX have authorized the execution and delivery of the
Agreement by and have approved the transactions contemplated hereby.
5.13 MATERIAL TRANSACTIONS OR AFFILIATIONS.
There are no material contracts or agreements of arrangement between
DSFX and any person, who was at the time of such contract, agreement or
arrangement an officer, director or person owning of record, or known to
beneficially own ten percent (10%) or more of the issued and outstanding Common
Shares of DSFX and which is to be performed in whole or in part after the date
hereof. Except as disclosed in Schedule 5.13, DSFX has no commitment, whether
written or oral, to lend any funds to, borrow any money from or enter into
material transactions with any such affiliated person.
5.14 NO CONFLICT WITH OTHER INSTRUMENTS.
The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of, or constitute an event of default under, any material
indenture, mortgage, deed of trust or other material contract, agreement or
instrument to which DSFX is a party or to which any of its properties or
operations are subject.
5.15 GOVERNMENTAL AUTHORIZATIONS.
DSFX has all licenses, franchises, permits or other governmental
authorizations legally required to enable it to conduct its business in all
material respects as conducted on the date hereof. Except for compliance with
federal and state securities and corporation laws, as hereinafter provided, no
authorization, approval, consent or order of, or registration, declaration or
filing with, any court or other governmental body is required in connection with
the execution and delivery by DSFX of this Agreement and the consummation of the
transactions contemplated hereby.
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ARTICLE 6. SPECIAL COVENANTS
6.1 ACCESS TO PROPERTIES AND RECORDS.
Prior to closing, DSFX and UCG will each afford to the officers and
authorized representatives of the other full access to the properties, books and
records of each other, in order that each may have full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of the other
and each will furnish the other with such additional financial and operating
data and other information as to the business and properties of each other, as
the other shall from time to time reasonably request.
6.2 AVAILABILITY OF RULE 144.
DSFX and UCG Shareholders holding "restricted securities, " as that
term is defined in Rule 144 promulgated pursuant to the Securities Act will
remain as "restricted securities". DSFX is under no obligation to register such
shares under the Securities Act, or otherwise. The stockholders of DSFX and UCG
holding restricted securities of DSFX and UCG as of the date of this Agreement
and their respective heirs, administrators, personal representatives, successors
and assigns, are intended third party beneficiaries of the provisions set forth
herein. The covenants set forth in this Section 6.2 shall survive the Closing
and the consummation of the transactions herein contemplated.
6.3 THE STOCK MERGER CONSIDERATION.
The consummation of this Agreement, including the issuance of the DSFX
Common Shares to the UCG Shareholders as contemplated hereby, constitutes the
offer and sale of securities under the Securities Act, and applicable state
statutes. Such transaction shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such statutes that
depend, inter alia, upon the circumstances under which the UCG Shareholders
acquire such securities.
6.4 THIRD PARTY CONSENTS.
DSFX and UCG agree to cooperate with each other in order to obtain any
required third party consents to this Agreement and the transactions herein
contemplated.
6.5 ACTIONS PRIOR AND SUBSEQUENT TO CLOSING.
(a) From and after the date of this Agreement until the Closing Date,
except as permitted or contemplated by this Agreement, DSFX and UCG will each
use its best efforts to:
(i) maintain and keep its properties in states of good repair
and condition as at present, except for depreciation due to ordinary
wear and tear and damage due to casualty;
(ii) maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it; and
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(iii) perform in all material respects all of its obligations
under material contracts, leases and instruments relating to or
affecting its assets, properties and business.
(b) From and after the date of this Agreement until the Closing Date,
DSFX will not, without the prior consent of UCG:
(i) except as otherwise specifically set forth herein, make
any change in its articles of incorporation or bylaws;
(ii) declare or pay any dividend on its outstanding Common
Shares, except as may otherwise be required by law, or effect any stock
split or otherwise change its capitalization, except as provided
herein;
(iii) enter into or amend any employment, severance or
agreements or arrangements with any directors or officers;
(iv) grant, confer or award any options, warrants, conversion
rights or other rights not existing on the date hereof to acquire any
Common Shares; or
(v) purchase or redeem any Common Shares.
6.6 INDEMNIFICATION.
(a) DSFX hereby agrees to indemnify UCG, each of the officers, agents
and directors and current shareholders of UCG as of the Closing Date against any
loss, liability, claim, damage or expense (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject to or rising out of or based
on any inaccuracy appearing in or misrepresentation made in this Agreement. The
indemnification provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of this
Agreement; and
(B) UCG hereby agrees to indemnify DSFX, each of the officers, agents, directors
and current shareholders of DSFX as of the Closing Date against any loss,
liability, claim, damage or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened or any claim whatsoever), to
which it or they may become subject arising out of or based on any inaccuracy
appearing in or misrepresentation made in this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this Agreement.
6.7 UCG SHAREHOLDER REPRESENTATIONS. Each of the UCG Shareholders
represents and warrants as follows:
(a) as of the date of this Agreement each of the UCG Shareholders was,
and at the Closing Date it is, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such UCG Shareholder has not been formed solely
for the purpose of acquiring the DSFX Common Stock. Each UCG Shareholder is not
a registered broker-dealer under Section 15 of the Exchange Act.
- 12 -
(b) each of the UCG Shareholders are knowledgeable and experienced in
finance and business matters and thus they are able to evaluate the risks and
merits of acquiring the shares of Common Stock of DSFX;
(c) each of the UCG Shareholders are able to bear the economic risk of
purchasing the DSFX common stock;
(d) DSFX has provided the UCG Shareholders with access to the type of
information normally provided in a prospectus;
(e) DSFX did not use any form of public solicitation or general
advertising in connection with the issuance of the shares;
(f) as to the following UCG Shareholders (Xxxx Xxxx, Xxxxxxxx Xx, Xxx
Xxxx, Yundai Liu, Xxxxxxx Xxx, First Capital Limited, China US Bridge Capital
Limited, Shenzhen Dingyi Investment Company Limited, and Shenzhen Huayin
Guaranty and Investment Company Limited (collectively the "Offshore UCG
Shareholders") the offer of such securities was not made to a person in the
United States and either (A) at the time the buy order was originated, each of
the Offshore UCG Shareholders was outside the United States (in China), or DSFX
and any person acting on its behalf reasonably believed that each Offshore UCG
Shareholders was outside the United States, or (B) the transaction was not
executed on or through the facilities of the Over the Counter Bulletin Board and
neither DSFX nor any person acting on its behalf knows that the transaction has
been prearranged with a person in the United States;
(g) the transactions contemplated hereby are bona fide and not for the
purpose of "washing off' the resale restrictions imposed because the securities
are "restricted securities" (as that term is defined in Rule 144(a)(3) under the
0000 Xxx);
(h) each of the UCG Shareholders understands and acknowledges that none
of the DSFX Common Stock has been registered under the Securities Act. Each UCG
Shareholder is acquiring the DSFX Common Stock as principal for its own account
and not with a view to or for distributing or reselling such securities or any
part thereof, without prejudice, however, to such UCG Shareholder's right,
subject to the provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such securities pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such UCG Shareholder to hold the securities for any period of time. Such UCG
Shareholder is acquiring the DSFX Common Stock hereunder in the ordinary course
of its business. Such UCG Shareholders does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
DSFX Common Stock.
ARTICLE 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF DSFX AND SUB
The obligations of DSFX and Sub under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
- 13 -
7.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties made by UCG in this Agreement were
true when made and shall be true at the Closing Date with the same force and
effect as if such representations and warranties were made at the Closing Date
(except for changes therein permitted by this Agreement), and UCG shall have
performed or compiled with all covenants and conditions required by this
Agreement to be performed or complied with by UCG prior to or at the Closing UCG
shall be furnished with a certificate, signed by a duly authorized officer of
UCG and dated the Closing Date, to the foregoing effect.
7.2 DIRECTOR APPROVAL.
The Board of Directors of DSFX shall have approved this Agreement and
the transactions contemplated herein.
7.3 OFFICER'S CERTIFICATE.
DSFX shall have been furnished with a certificate dated the Closing
Date and signed by a duly authorized officer of UCG to the effect that: (a) the
representations and warranties of UCG set forth in the Agreement and in all
exhibits, schedules and other documents furnished in connection herewith are in
all material respects true and correct as if made on the Effective Date; (b) UCG
has performed all covenants, satisfied all conditions, and complied with all
other terms and provisions of this Agreement to be performed, satisfied or
complied with by it as of the Effective Date; (c) since such date and other than
as previously disclosed to DSFX, UCG has not entered into any material
transaction other than transactions which are usual and in the ordinary course
if its business; and (d) no litigation, proceeding, investigation or inquiry is
pending or, to the best knowledge of UCG, threatened, which might result in an
action to enjoin or prevent the consummation of the transactions contemplated by
this Agreement or, to the extent not disclosed in the UCG Schedules, by or
against UCG which might result in any material adverse change in any of the
assets, properties, business or operations of UCG.
7.4 NO MATERIAL ADVERSE CHANGE.
Prior to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, business or operations of nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of UCG.
7.5 OTHER ITEMS.
DSFX shall have received such further documents, certificates or
instruments relating to the transactions contemplated hereby as DSFX may
reasonably request.
ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF UCG AND THE UCG SHAREHOLDERS
The obligations of UCG and the UCG Shareholders under this Agreement
are subject to the satisfaction, at or before the Closing date (unless otherwise
indicated herein), of the following conditions:
- 14 -
8.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties made by DSFX in this Agreement were
true when made and shall be true as of the Closing Date (except for changes
therein permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date, and DSFX
shall have performed and complied with all covenants and conditions required by
this Agreement to be performed or complied with by DSFX prior to or at the
Closing. UCG shall have been furnished with a certificate, signed by a duly
authorized executive officer of DSFX and dated the Closing Date, to the
foregoing effect.
8.2 DIRECTOR APPROVAL.
The Board of Directors of UCG shall have approved this Agreement and
the transactions contemplated herein.
8.3 NO MATERIAL ADVERSE CHANGE.
Prior to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, business or operations of nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of DSFX
ARTICLE 9. TERMINATION
9.1 TERMINATION RIGHTS.
(a) This Agreement may be terminated by the board of directors or
majority interest of Shareholders of either DSFX or UCG, respectively, at any
time prior to the Closing Date if:
(i) there shall be any action or proceeding before any court
or any governmental body which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement and which,
in the judgment of such board of directors, made in good faith and
based on the advice of its legal counsel, makes it inadvisable to
proceed with the exchange contemplated by this Agreement; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required to
consummate such transactions.
In the event of termination pursuant to this paragraph (a), no
obligation, right, or liability shall arise hereunder and each party shall bear
all of the expenses incurred by it in connection with the negotiation, drafting
and execution of this Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of DSFX if UCG shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of UCG contained herein
- 15 -
shall be inaccurate in any material respect, which noncompliance or inaccuracy
is not cured after 20 days written notice thereof is given to UCG. If this
Agreement is terminated pursuant to this paragraph (b), this Agreement shall be
of no further force or effect and no obligation, right or liability shall arise
hereunder.
(c) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of UCG if DSFX shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of DSFX contained
herein shall be inaccurate in any material respect, which noncompliance or
inaccuracy is not cured after 20 days written notice thereof is given to DSFX If
this Agreement is terminated pursuant to this paragraph (d), this Agreement
shall be of no further force or effect and no obligation, right or liability
shall arise hereunder.
(d) In the event of termination pursuant to paragraph (b) and (c)
hereof, the breaching party shall bear all of the expenses incurred by the other
party in connection with the negotiation, drafting and execution of this
Agreement and the transactions herein contemplated.
ARTICLE 10. MISCELLANEOUS
10.1 BROKERS AND FINDERS.
Each party hereto hereby represents and warrants that it is under no
obligation, express or implied, to pay certain finders in connection with the
bringing of the parties together in the negotiation, execution, or consummation
of this Agreement. The parties each agree to indemnify the other against any
claim by any third person for any commission, brokerage or finder's fee or other
payment with respect to this Agreement or the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.
10.2 LAW, FORUM AND JURISDICTION.
This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York, United States of America, except for
applicable provisions of the Delaware General Corporation Law, which shall
control to the extent applicable.
10.3 NOTICES.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if personally delivered to it or sent by registered
mail or certified mail, postage prepaid, or by prepaid telegram addressed as
follows:
If to DSFX: 00000 Xxxxxxxx Xxxx Xxxxx 0000, Xxx Xxxxxxx, XX 00000
If to UCG: Haoyuan Chemical Company Limited, Chengming Industrial Park,
Shouguang City, Shandong, P.R. China 262714
or such other addresses as shall be furnished in writing by any party
in the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed or
telegraphed.
- 16 -
10.4 ATTORNEYS' FEES.
In the event that any party institutes any action or suit to enforce
this Agreement or to secure relief from any default hereunder or breach hereof,
the breaching party or parties shall reimburse the non-breaching party or
parties for all costs, including reasonable attorneys' fees, incurred in
connection therewith and in enforcing or collecting any judgment rendered
therein.
10.5 CONFIDENTIALITY.
Each party hereto agrees with the other party that, unless and until
the transactions contemplated by this Agreement have been consummated, they and
their representatives will hold in strict confidence all data and information
obtained with respect to another party or any subsidiary thereof from any
representative, officer, director or employee, or from any books or records or
from personal inspection, of such other party, and shall not use such data or
information or disclose the same to others, except: (i) to the extent such data
is a matter of public knowledge or is required by law to be published; and (ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement.
10.6 SCHEDULES; KNOWLEDGE.
Each party is presumed to have full knowledge of all information set
forth in the other party's schedules delivered pursuant to this Agreement.
10.7 THIRD PARTY BENEFICIARIES.
This contract is solely among the parties hereto and except as
specifically provided, no director, officer, stockholder, employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
10.8 ENTIRE AGREEMENT.
This Agreement represents the entire agreement between the parties
relating to the subject matter hereof. This Agreement alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
There are no other courses of dealing, understanding, agreements,
representations or warranties, written or oral, except as set forth herein. This
Agreement may not be amended or modified, except by a written agreement signed
by all parties hereto.
10.9 SURVIVAL; TERMINATION.
The representations, warranties and covenants of the respective parties
shall survive the Closing Date and the consummation of the transactions herein
contemplated for 18 months.
10.10 COUNTERPARTS.
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall be but a
single instrument.
- 17 -
10.11 AMENDMENT OR WAIVER.
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in equity, and may
be enforced concurrently herewith, and no waiver by any party of the performance
of any obligation by the other shall be construed as a waiver of the same or any
other default then, theretofore, or thereafter occurring or existing. At any
time prior to the Closing Date, this Agreement may be amended by a by all
parties hereto, with respect to any of the terms contained herein, and any term
or condition of this Agreement may be waived or the time for performance hereof
may be extended by the party or parties for whose benefit the provision is
intended.
10.12 EXPENSES.
Each party herein shall bear all of their respective cost s and
expenses incurred in connection with the negotiation of this Agreement and in
the consummation of the transactions provided for herein and the preparation
thereof.
10.13 HEADINGS; CONTEXT.
The headings of the sections and paragraphs contained in this Agreement
are for convenience of reference only and do not form a part hereof and in no
way modify, interpret or construe the meaning of this Agreement.
10.14 BENEFIT.
This Agreement shall be binding upon and shall inure only to the
benefit of the parties hereto, and their permitted assigns hereunder. This
Agreement shall not be assigned by any party without the prior written consent
of the other party.
10.15 PUBLIC ANNOUNCEMENTS.
Except as may be required by law, neither party shall make any public
announcement or filing with respect to the transactions provided for herein
without the prior consent of the other party hereto.
10.16 SEVERABILITY.
In the event that any particular provision or provisions of this
Agreement or the other agreements contained herein shall for any reason
hereafter be determined to be unenforceable, or in violation of any law,
governmental order or regulation, such unenforceability or violation shall not
affect the remaining provisions of such agreements, which shall continue in full
force and effect and be binding upon the respective parties hereto.
10.17 FAILURE OF CONDITIONS; TERMINATION.
In the event of any of the conditions specified in this Agreement shall
not be fulfilled on or before the Closing Date, either of the parties have the
right either to proceed or, upon prompt written notice to the other, to
terminate and rescind this Agreement. In such event, the party that has failed
to fulfill the conditions specified in this Agreement will liable for the other
parties legal fees. The election to proceed shall not affect the right of such
electing party reasonably to require the other party to continue to use its
efforts to fulfill the unmet conditions.
- 18 -
10.18 NO STRICT CONSTRUCTION.
The language of this Agreement shall be construed as a whole, according
to its fair meaning and intendment, and not strictly for or against either party
hereto, regardless of who drafted or was principally responsible for drafting
the Agreement or terms or conditions hereof.
10.19 EXECUTION KNOWING AND VOLUNTARY.
In executing this Agreement, the parties severally acknowledge and
represent that each: (a) has fully and carefully read and considered this
Agreement; (b) has been or has had the opportunity to be fully apprized by its
attorneys of the legal effect and meaning of this document and all terms and
conditions hereof; (c) is executing this Agreement voluntarily, free from any
influence, coercion or duress of any kind.
10.20 AMENDMENT.
At any time after the Closing Date, this Agreement may be amended by
both parties, with respect to any of the terms contained herein, and any term or
condition of this Agreement may be waived or the time for performance hereof may
be extended by the party or parties for whose benefit the provision is intended.
- 19 -
[Signature page follows]
- 20 -
IN WITNESS WHEREOF, DSFX, Sub and UCG, each pursuant to the approval
and authority duly given, as well as the UCG Shareholders, have caused this
Agreement and Plan of Merger to be executed as of the date first above written.
DIVERSIFAX, INC.
By: /s/ Xxxxxxx Xx
-------------------------------------
Xxxxxxx Xx
President and Chief Executive Officer
DFAX ACQUISITION VEHICLE, INC.
By: /s/ Xxxxxxx Xx
-------------------------------------
Xxxxxxx Xx
Its Chairman of the Board and Chief
Executive Officer
UPPER CLASS GROUP LIMITED
By: /s/ Xxxx Xxxx
-------------------------------------
Xxxx Xxxx
Its Sole Director
UCG SHAREHOLDERS
/s/ Xxxx Xxxx FIRST CAPITAL LIMITED
----------------
Xxxx Xxxx
By: /s/ Xxxxxx Xx
-----------------------------------
/s/ Xxxxxxxx Xx Name/ Xxxxxx Xx
---------------- Title President
Xxxxxxxx Xx
/s/ Xxx Xxxx SHENZHEN DINGYI INVESTMENT
---------------- COMPANY LIMITED
Xxx Xxxx
By: /s/ Hongyan Sun
-----------------------------------
Name/ Hongyan Sun
Title President
- 21 -
/s/ Yundai Liu
----------------
Yundai Liu
CHINA US BRIDGE CAPITAL LIMITED
/s/ Xxxxxxx Xxx
----------------
Xxxxxxx Xxx By: /s/ Guogiong Yu
-----------------------------------
Name/ Guogiong Yu
Title President
SHENZHEN HUAYIN GUARANTY AND
INVESTMENT COMPANY LIMITED
By: /s/ Xxxxxxx Xx
-----------------------------------
Name/ Xxxxxxx Xx
Title Chairman
- 22 -
SCHEDULE A
UCG SHAREHOLDERS
SHARES OF
UCG COMMON STOCK DIVERSIFAX, INC.
NAME OF UCG SHAREHOLDER OWNERSHIP % SHARES OF UCG COMMON STOCK
----------------------- ---------------- ------------- ----------------
Xxxx Xxxx ............. 18.96% 9,480 5,024,400
Xxxxxxxx Xx ........... 18.96% 9,480 5,024,400
Xxx Xxxx .............. 12.64% 6,320 3,349,600
Yundai Liu ............ 6.32% 3,160 1,674,800
Xxxxxxx Xxx ........... 6.32% 3,160 1,674,800
Shenzhen Huaying ...... 6.3% 3,150 1,669,500
Guaranty and
Investment Company
Limited
First Capital Limited . 11% 5,500 2,915,000
Shenzhen Dingyi
Investment Company
Limited ............... 9.5% 4,750 2,517,500
China US Bridge Capital
Limited ............... 10% 5,000 2,650,000
- 23 -
