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;
