Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this "Agreement") has been made as
of
October 29, 2007, by and among Carlateral Inc., a Nevada
corporation ("CARZ"),
CARZ Merger Sub, Inc., a Nevada corporation and a wholly-owned
Subsidiary of
CARZ ("Sub"), Dongfang Zhiye Holding Limited, a British Virgin
Islands
corporation ("DZHL"), and the shareholders of DZHL, each of whom is
identified
on Schedule A to this Agreement (the "DZHL Shareholders").
Whereas,
the respective Boards of Directors of CARZ, Sub and DZHL have
approved the merger, pursuant and subject to the terms and
conditions of this
Agreement, of Sub with and into DZHL (the "Merger"), whereby all of
the issued
and outstanding shares of the Common Stock of DZHL (the "DZHL
Common Stock")
will be converted into the right to receive a specified number of
shares of the
Common Stock of CARZ (the "CARZ 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.
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"Code"
means the Internal Revenue Code of 1986, as amended, together
with
all rules and regulations promulgated thereunder.
"Constituent Corporations" means DZHL and Sub, as the
constituent
corporations of the Merger.
"GAAP"
means United States generally accepted accounting practices.
"GCL"
means the Nevada General Corporation Law.
"Person"
means and includes any individual, partnership, corporation,
trust, company, unincorporated organization, joint venture or other
entity, and
any Governmental Entity.
"Record
Holder" means a holder of record of DZHL Common Stock as shown
on
the regularly maintained stock transfer records of DZHL.
"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 DZHL, 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;
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(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 Nevada of
articles of merger, in such form as required by, and signed and
attested in
accordance with, the relevant provisions of the GCL (the time of
such filing or
such later time and date as is specified in such filing being the
"Effective
Time").
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 Article 9
are
satisfied or waived by the appropriate party, but in no event later
than the
applicable date referred to in Section 10.1(d) (the "Closing
Date"), unless
another time, date or place is agreed to in writing by the
parties.
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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 DZHL, and (ii) the
certificate of
incorporation and bylaws of DZHL 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 DZHL 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.
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(b) Cancellation of Treasury Stock. Shares of DZHL Common Stock,
if
any, that are held by DZHL as treasury stock will be cancelled and
retired and
will cease to exist, and no Merger Consideration will be delivered
in exchange
therefore. CARZ Common Stock, if any, owned by DZHL as of the
Effective Time
will remain unaffected by the Merger.
(c) Exchanged Shares; Merger Consideration.
(i) "Exchanged Shares" means all shares of DZHL Common Stock
issued
and outstanding immediately prior to the Effective Time other than
shares of
DZHL Common Stock, if any, held by DZHL as treasury stock.
(ii) The consideration payable in the Merger will consist of an
aggregate of 29,801,987 shares of CARZ Common Stock, which shall be
distributed
among the DZHL Shareholders in accordance with Schedule A hereto
(the "Stock
Merger Consideration").
(iii) "Merger Consideration" means the Stock Merger
Consideration.
(d) Exchange of Exchanged Shares for 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 Merger
Consideration,
payable, to the Record Holders of Exchanged Shares at the Effective
Time. As of
the Effective Time, all shares of DZHL 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 Merger
Consideration therefore, without interest, upon the surrender of
such
certificate in accordance with Section 3.2.
3.2 Exchange of Merger
Consideration for Exchanged Shares.
(a) Exchange. On the Closing Date, the holders of all of the
DZHL
Common Stock shall deliver to CARZ certificates or other documents
evidencing
all of the issued and outstanding DZHL Common Stock, duly endorsed
in blank or
with executed power attached thereto in transferable form. In
exchange for all
of the DZHL Common Stock tendered pursuant hereto, CARZ shall issue
to DZHL
Shareholders the Stock Merger Consideration.
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(b) No Further Ownership Rights in DZHL Common Stock. All shares
of
CARZ Common Stock issued upon the surrender for exchange of shares
of DZHL
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 DZHL
Common Stock, and there will be no further registration of
transfers of the
shares of DZHL Common Stock (other than shares held directly or
indirectly by
CARZ) 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 DZHL
DZHL
represents and warrants to CARZ and to Sub as follows, as of the
date
hereof and as of the Closing Date:
4.1
Organization.
DZHL 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
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 DZHL's certificate of incorporation or bylaws. DZHL
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 DZHL 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.
DZHL has no
other securities, warrants or options authorized or issued.
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4.3
Subsidiaries.
DZHL owns
100% of Hebei Baoding Orient Paper Milling Company Limited,
which is the Chinese operational subsidiary.
4.4
Tax Matters;
Books & Records
(a) The books and records, financial and others, of DZHL are in
all
material respects complete and correct and have been maintained in
accordance
with good business accounting practices; and
(b) DZHL 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) DZHL shall remain responsible for all debts incurred prior
to
the closing.
4.5
Information.
The
information concerning DZHL 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.
DZHL 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,
DZHL 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 DZHL's business.
Except as set
forth in the attached Schedules, no third party has any right to,
and DZHL has
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not received any notice of infringement of or conflict with
asserted rights of
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 DZHL 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 DZHL, 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 DZHL.
DZHL 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:
(a) Except as set forth on Schedule, there are no material
contracts, agreements, franchises, license agreements, or other
commitments to
which DZHL is a party or by which it or any of its properties are
bound;
(b) DZHL 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 DZHL can now
foresee)
materially and adversely affect, the business, operations,
properties, assets or
conditions of DZHL; and
(c) DZHL 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
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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 DZHL is a party or to which any of its properties or
operations are
subject.
4.10
Material Contract
Defaults.
To the
best of DZHL'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 DZHL, and there is no event of default in
any material
respect under any such contract, agreement, lease or other
commitment in respect
of which DZHL has not taken adequate steps to prevent such a
default from
occurring.
4.11
Governmental
Authorizations.
To the
best of DZHL's knowledge, DZHL 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
DZHL of the
transactions contemplated hereby.
4.12
Compliance With Laws
and Regulations.
To the
best of DZHL's knowledge and belief, DZHL 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 DZHL or would not result in DZHL's incurring any
material
liability.
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4.13
Insurance.
All of the
insurable properties of DZHL are insured for DZHL'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 DZHL 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 DZHL 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 DZHL to own beneficially, ten percent (10%) or more of the
issued and
outstanding Common Shares of DZHL and which is to be performed in
whole or in
part after the date hereof. DZHL 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 CARZ
CARZ
represents and warrants to DZHL, as of the date hereof and as of
the
Closing Date, as follows:
5.1
Organization.
CARZ is a corporation
duly organized, validly existing, and in good
standing under the laws of Nevada 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 CARZ's
articles of
incorporation or bylaws. CARZ 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.
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5.2
Capitalization.
The
authorized capitalization of CARZ consists of 75,000,000 shares
of
common stock, $0.001 par value per share. As of the date hereof,
CARZ has
approximately 10,300,000 shares of common stock issued and
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.
CARZ has
no subsidiaries other than Sub.
5.4
Tax Matters:
Books and Records.
(a) The books and records, financial and others, of CARZ are in
all
material respects complete and correct and have been maintained in
accordance
with good business accounting practices; and
(b) CARZ has no liabilities with respect to the payment of any
country, federal, state, county, or local taxes (including any
deficiencies,
interest or penalties).
(c) CARZ shall remain responsible for all debts incurred by
CARZ
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 CARZ 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
